A demographic 'time bomb" leading to a 30% increase in already high income taxes, and giving rise to an intergenerational "age war" - that's the Association of Canadian Pension Management's grim prognosis for our retirement income system. - -ACPM's 1,000 members oversee 80% of Canadian pension assets.

The basic problem, according to an ACPM report released last month, is that, starting in 10 years, the demographic Baby Boom bulge will begin retiring, straining our retirement and health care systems to the breaking point.

'These programs could become unstuck as the ratio of workers to pensioners falls from [the current] 4:1 to 2:1 over the next 30 years", the report noted. Canada's public spending on pensions and health care could rise from 13% if GDP in 1995 to 23% in 2030 as a result. If individuals and employers fund the full cost - as is the case now - tax revenues from all sources may have to rise about 30% in real, after-inflation terms, the report noted. The ACPM report was an emphatic call to action. 'Time is running out,' said Gretchen Van Reisen, chairwoman of the ACPM Task Force that prepared the report. 'We need to act now". The report called on the federal government to make changes to reinforce the three pillars of our retirement regime: Canada/Quebec Pension Plan, the Old Age Security/Guaranteed Income Supplement safety net, and private savings (pensions and RRSPS). "The government dealt effectively with CPP a few years ago.' says Malcolm Hamilton of William M. Mercer Ltd. in Toronto and one of the report's authors. "But CPP is only a small part of the problem."

 ACPM also recommended that the federal government:

• double the contribution room for pensions and RRSPS;
• scrap the 20% foreign content limit on registered savings;
• restrain the availability of OAS/GIS;
• reduce disincentives for Canadians to save for retirement (i.e. ensure that OAS/GIS clawbacks combined with taxes never exceed 50%);
• put greater emphasis on reducing public debt;
• encourage individuals to take more responsibility for their own financial future.

The report called for both levels of government to overhaul the current tangled mish-mash of federal and provincial retirement-related laws, and develop a cohesive strategic and regulatory framework for facilitating the accumulation of private retirement savings. The financial services industry, meanwhile, should be able to provide more reasonably priced and more accessible and transparent retirement savings products than are currently available. The report noted that each percentage point added to a fund's MER could result in a 20% decline in retirement income. The report also recommended the industry provide more effective 'financial wellness' education programs, and called for the creation of independent third-party investment fund boards answerable to unitholders, as have existed in the United States for 60 years.

on the shoulders of individuals as much as institutions. 'The long time frame needed to intelligently assess these issues lies well outside the standard four-year political cycle,' said Ms. Van Riesen. 'The leadership for change must come from ordinary Canadians, their employers and, where relevant, their unions or employee associations."

What should we be doing? 'One of the main purposes of this [report] was to draw attention to the problem, and get people thinking about it now,' says Mr. Hamilton. 'We hope this paper will help jump-start the process.'

Canadians must assess their current retirement income arrangements, and decide to what extent they should be based on self-reliance as opposed to government handouts. Employers and organized labour should co-operate in the quest, for suitable arrangements.

If current social policy and tax rules are at odds with the best arrangement, then individuals must he willing to make their views known to employers as well as to the provincial and federal governments. The report concluded that if we pull together, creating the best retirement income system in the world lies within our grasp.

It can be done," says Ms. Van Riesen. "They did a really good job with CPP but we need to do that with everything else."