Beyond the usual rhetoric, a most unusual platform is taking shape in the Liberal campaign shop. Ahead of a possible spring election, Premier Kathleen Wynne has seized on a sleeper issue for her political revival:
Improbably, pensions now dominate her political speeches. Her strongest attack lines have targeted Prime Minister Stephen Harper for blocking Canada Pension Plan improvements.
“If you (Harper) won’t lead the way, then get out of the way,” she told cheering Liberals at a weekend convention.
“We must act now to stave off crisis in our retirement income system,” Wynne exhorted donors at a major party fundraiser 48 hours before.
Wynne is right to lament the lack of federal leadership on CPP improvements. Building a new Ontario Pension Plan is worthy public policy.
But is it a political winner?
The answer could be heard at an invitation-only seminar convened this month by HOOPP, the Healthcare of Ontario Pension Plan. One of several retirement funds with massive assets and minimal profile, it keeps delivering stellar returns with admirably low fees.
Now HOOPP is of a mind to share its bounty with the rest of us — not its wealth, but its wisdom. The audience got a sneak peak at some revealing public opinion research compiled for HOOPP that paints a picture of voter anxiety.
Two-thirds of Ontarians worry about having enough money in their old age, and 86 per cent believe there is a retirement income crisis. About seven in 10 say employers are failing to deliver reliable pensions, and blame government for not doing enough.
Eight out of 10 say they want a pension that pays a guaranteed amount (defined benefit), as opposed to “defined contribution” schemes that are glorified savings plans.
One of the more noteworthy aspects of the presentation was the presenter, pollster David Herle, who was hired by HOOPP a few years ago to research public attitudes. These days, Herle wears another hat as Wynne’s campaign manager and chief strategist.
Little wonder Wynne has hit on public pensions as her personal salvation.
Herle clearly believes the new Ontario Pension Plan she’s cobbling together is good politics. It could also be good government.
That seems to be the shared verdict from HOOPP president Jim Keohane, who followed Herle at the microphone. Keohane, who is also serving as an adviser to the Wynne government on a new Ontario pension, brought the perspective of a seasoned financial analyst to the debate.
Without major reforms, a wave of retirees will require social assistance, becoming a burden on taxpayers, Keohane warned: “You can pay me now or you can pay me later, but the cost of paying me later is much higher.”
So-called “defined contribution” (DC) savings plans that are displacing traditional pensions in the private sector will leave people vulnerable. For example, anyone trying to try to convert their DC savings into an annuity during the 2008 financial crisis would have received dismal interest rates for the rest of their retirement years. By contrast, someone retiring with a traditional pension plan from HOOPP would benefit from inter-generational risk-sharing to ensure a constant payout, in good times or bad.
Keohane notes that HOOPP’s pensioners — retired nurses, orderlies and caregivers — don’t have gold-plated pensions. They get an average $23,000 annually, thanks to a fund that has delivered returns of 10 per cent annually compounded over the past decade while charging a mere 0.3 per cent for expenses (compared to management fees that can be 10 times higher for private sector retirement funds).
Can the HOOPP model, and those of other successful public pension funds for teachers and municipal workers, be emulated in the province-wide fund that Wynne is proposing?
“All the preconditions are there,” Herle believes.
We’ll soon see if the political conditions are there, too.