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The article reviews the book, "Pension Power: Unions, Pension Funds, and Social Investment in Canada," by Isla Carmichael.
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The article reviews the book, "Privatizing Pensions: The Transnational Campaign for Social Security Reform," by Mitchell A. Orenstein.
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The overarching theme of this paper is whether future retirees are likely to have an adequate standard of living in retirement, and related policy issues. The author begins by outlining Canada's three-pillared retirement income sys- tem, and by identifying the similarities and differences between defined benefit (DB) pension plans and defined contribution (DC) pension plans. Given the relative imprecision of these terms, the author cautions against treating pension plan design as a binary choice between DB and DC. The dimensions of the ongoing shift from DB to DC plans are measured by reference to information from Statistics Canada. The paper goes on to consider the capacity of DB and DC plans to generate pension income, through an examination of comparative data on contributions, rates of return and expenses. The paper also asks whether participants in DB plans enjoy an advantage over participants in other types of plans, in terms of accumulation of retirement wealth. As a corollary to this question, the author reviews several studies that attempt to map the range of benefit outcomes in DC plans. In sum, the author concludes that the switch from DB to DC increases the unpredictability of retirement income, manifested as both unpredictable retirement ages and unpredictable levels of income. Recent attempts have been made to enhance the predictability of contributions and benefits by creating plan designs which incorporate elements of both DB and DC, i.e. target benefit plans. However, the author points out, of almost equal importance to the issue of plan design is the issue of identifying appropriate organizational platforms for the delivery of pension benefits.
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This paper applies a statistical analysis to quantify the impact of the ongoing shift in Canadian workplaces from defined benefit pension plans to defined contribution pension plans. The basis for the analysis is Statistics Canada's LifePaths model, which aims to simulate the life experiences of "synthetic individuals" to whom are assigned characteristics which are rep- resentative of the Canadian population, as identified by census, survey and administrative data. The authors conclude that the shift from DB plans to DC plans has a significant negative impact on pre-tax registered pension plan (RPP) income. The losses are considerably smaller when the focus of analysis moves to total income and net after-tax income. However, because much of what reduces the larger gross effect of lost RPP income is lower personal income taxes, the trend from DB to DC involves a fiscal impact, by generating upward pressure on public expenditures. The authors emphasize that the results of this study reflect the attributes of DC plans as they have existed until now, and not as they might exist in a reconceptualized form.
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