Quebec, much like other provinces, has some serious problems with its pensions, notably their exploding costs and the fact that many people will outlive their savings. The Charest government mandated Alban D’Amours, former CEO of Mouvement des caisses Desjardins (the credit union subdivision of Desjardins) and a group of experts to shine a light on the problems and bring forward solutions. Their report won’t revolutionize anything, but did highlight some interesting problems.

Most important is the fact that the average Quebecer retires two years earlier than the average Canadian. This practice is encouraged by the Régie des rentes du Québec (RRQ, the provincial pension plan), which penalizes revenues earned after age 60 – working after age 60 decreases the pension received. This early retirement creates tremendous pressure on public pensions, which are paid mainly out of regular government revenues.

To solve the problem, D’Amours suggests the abolition of compulsory retirement so that “the worker must remain free to decide the time of his effective retirement.” It just makes sense: compulsory retirement at 65 was invented in 19th century Germany, when people on average lived to be 68 years old.

Another major problem is the strict rigidity of laws surrounding pensions. As of now, it’s nearly impossible to change benefits or to adjust annual indexation, which makes pensions, especially those of former public employees, 30% more expensive. Letting people negotiate their plans as D’Amours suggests could avoid default and ensure their viability.

Unfortunately, most other recommendations are based on the faulty assumption that governments must provide virtually all retirement funds – D’Amours uses a house analogy to talk about pensions, stating that both the foundations and the walls must be built by governments. It’s disappointing that a doctor of economics wouldn’t push ideas that would encourage more private savings.

D’Amours also proposed the government create a “longevity annuity,” although people would only earn it once they reach the age of 75. Once more, this would be a one-size-fits-all solution where workers would have fewer incentives to save since they know that other taxpayers have their back. According to a study by the Ministry of Finance, this annuity, paid for by taxing up to 3.3% of one’s annual salary, would decrease economic activity by at least $2 billion.

What pensions in Quebec really need is for the government to get out of them. That way, people could choose to invest their money where they see fit and taxpayers wouldn’t have to pay for others neglecting to save.