Long term, shortsighted

It's discouraging that a well-paid politician - Finance Minister Ted Morton - has abruptly rejected the idea of expanding the Canada Pension Plan to provide a better retirement cushion for ordinary workers.

Earlier this year, every provincial finance minister except Morton endorsed a proposal to phase in CPP enhancements.

"Expanding the Canada Pension Plan is not the answer," sniffed Morton after the last federal-provincial finance ministers' meeting in June.

"Alberta believes the solution is not to rely on future taxpayers to fund public income support systems, but to instead find ways to encourage Canadians to save for their retirement."

The problem with that approach is it doesn't take human behaviour into account. Yes, people should sock away more for their post-working lives - but they don't. Even financial planning courses and projects designed to encourage people to save can have lacklustre results, according to a new report by the Institute for Research on Public Policy (IRPP).

"Surprisingly, financial education programs have not been shown to increase financial knowledge," the report points out. "The challenge is that financial decisions such as saving for retirement or buying a house have little relevance for elementary and secondary school students."

More unsettling is the report's finding that matched savings programs with financial training classes haven't been particularly successful in getting the poor to save.

The study points to the Learn$ave program, in which each dollar deposited into an account for adult education was matched by a $2 contribution from the federal government.

Several thousand volunteers participated in the Learn$ave experiment and were divided into three groups. The control group received no services. The second group was offered the matched savings program and was required to attend financial training sessions. The third group was offered the matched savings program but was not allowed to take the finance classes.

In the end, the amount saved by the group that attended the classes was the same as the amount saved by those who didn't sit in on the seminars. "The effect of financial education was negligible," says the IRPP report.

What this suggests is that expecting ordinary Canadians to make savvy financial decisions about money issues - never mind the complexities of retirement planning - is unrealistic.

Yet Morton seems to think Albertans will be just fine figuring out retirement planning on their own. Financial institutions will offer an array of services and citizens will graze at the buffet, selecting the appropriate ingredients for their retirement years.

This comes from a cabinet minister who will receive a whopping transition allowance when he leaves politics.

Next Monday, the federal and provincial finance ministers are scheduled to meet in Kananaskis to discuss pension reform, among other issues.

And the Alberta Federation of Labour has released an open letter to the ministers to expand CPP. It is not an unreasonable plea. Two-thirds of Canadian workers don't have a company pension plan.

But don't expect any substantial promises on pension reform out of the Kananaskis meeting, warns Jack Mintz, head of the school of public policy at the University of Calgary.

"If there's any change, it'll be just a modest change," he says. Politicians, of course, don't have to worry about their retirement.

Edmonton Sun, Tues Dec 14 2010
Byline: Mindelle Jacobs

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