Emerging from the fog of "the great recession" is a single issue that ranks above all others in both gravity and complexity: pensions.
The economic meltdown has sapped the strength of private pensions and left many of them severely underfunded. Also looming are bankruptcies that could force private pension funds to fall back on government support mechanisms that are themselves underfunded.
Exhibit A is the auto sector, where the sustainability of company pension plans has become a key issue in the ongoing bailout talks among governments, companies and unions. General Motors alone is said to have a pension shortfall of more than $6 billion, and both the federal and provincial governments have indicated that they are not willing to make up that shortfall as part of the bailout deal.
Hence, this week's massive "protect our pensions" protest rally sponsored by the Canadian Auto Workers – the biggest seen on the front lawn of Queen's Park since the Mike Harris era.
But the auto company pensions are just the tip of the iceberg. Many other private sector pensions are underfunded as a result of the tumbling value of shares on the stock markets.
Also of concern is the widening pension chasm between the haves and the have-nots. Two-thirds of Ontarians have no workplace pension plan at all. Of those who have them in the private sector, there are older workers with traditional "defined benefit" pensions, where the payout upon retirement is determined by a set formula, and younger workers with "defined contribution" plans, where payments are made into individual retirement accounts and benefits are dependent on investment returns in the market.
Then there are public sector pension plans, entirely backstopped by governments – that is, taxpayers.
In the past, we could paper over these differences because the workforce was growing at a faster rate than the retirees, and the contributions of the former could help pay for the benefits of the latter. Now that equation is changing, and there is a real potential for generational warfare.
"I think it's time for the more thoughtful people in Canada to come together and to begin to look at this in earnest," said Premier Dalton McGuinty this week. "We need a major national rethink of our pensions and the benefits that are there, or not there, for the older generation, because we've parlayed ourselves into a period of pension crisis. And I don't think that's putting it too strongly."
Many solutions have been put forward in recent weeks, including: an expanded Canada Pension Plan; a separate provincial pension for workers not covered by any other plan (British Columbia is already pursuing this idea); and the merger of smaller plans with the big public-sector pensions like Teachers and OMERS, the municipal employees' plan.
What we need now is a public debate on pensions. McGuinty is calling for a national summit to tackle the issue. That would be a good start. Pensions are too important to leave the discussion to actuaries and accountants alone.