Tuesday, December 21, 2010

Is Pension Scheme Good for Us or for Mutual Fund Managers?

There is a need to get Canadians saving for their retirement.  No argument there.  The need to expand access to pensions is critical too. No argument there.  There is a role for the private and the public sector in this effort as well.  RRSPs are the model for the private sector play and the CPP is the public part in the process.

So now we have a scheme proposed that will enable people to set up private pension arrangements that don't get them from employers or the self-employed.  The theory is good but the execution and regulation of the program  is the concern.  This is on the face of it a Christmas gift to the financial institutions who will get enormous fees, the ability to leverage pooled funds and do not have to worry about investment performance as they play with the hopes and aspirations of possibly millions of individual Canadians.

I am told by pension fund managers that Canadians pay some of the highest, if not the highest, fund management fees in the world.  Will that change in this pooled pension scheme?  Will there be competition - I mean real competition - not price fixing collusion amongst fund managers for fees and investment performance?  Will the average Canadian even know how to monitor and evaluate the management service and fund performance they are getting?  Will contributors be fragmented individuals  no consumer or political clout who give their retirement nest eggs to fund managers with minimal accountability, transparency and responsibility?

This "solution" seems to be potentially more disastrous than the problem it is trying to solve...unless there is serious government regulation and over site...not lax enforcement and political over sights that is characteristic of the Harper political style to date.  Is there any reason for citizens to trust the political motives and in public interest integrity behind this scheme?

I am a free enterprise kind of guy and think capitalism is a great tool for economic growth.  But these are man- made concepts that only work if there is confidence and trust by the public who must feel assured that the public interest is the goal, not private greed.  We saw what happens when big fees and private greed takes over brokers and fund dealers.  Just look at the U.S. Sub-prime mortgage disaster that almost put the world into a depression "saved" by trillions of taxpayer dollars paid to bail out the "too big to fail" banks who were the "masters-of-the-universe types" who were ripping off everyone...or the Bernie Madoff example...just to name a few.

Free market capitalism only works with real competition and that only happens with the assurance of appropriate government regulations.  Market based competition is not  the solution to all the social, economic and environmental challenges we face - there is a fundamental role for good government.  We need both for a happy, wealthy and wise society.

I need to know a great deal more about this scheme and how it will be regulated and controlled by my government before I will buy in.  I need to know why the expansion and extension of the CPP was not an accepted Canadian-way alternative?  I need to be convinced this approach is about sound fiscal policy and not hard core Harper Conservative dogma wagging a poorly thought out public policy agendas.