All too often in recent years, Canadians have been stirred to a righteous frenzy by politicians warning of the dangers of two-tier health care, in which people of means can pay for prompt, first-class treatment at private facilities while everyone else settles for long waits and second-best through the public system.
Most voters have scarcely ever heard of, let alone discussed two-tier retirement, which is essentially the significant gap that exists between public and private pension plans, but it's time they did, according to the Canadian Federation of Independent Business (CFIB).
In 2005, the CFIB conducted a survey of its members to determine when they planned to retire.
Four in 10 said they intended to call it quits within the next five years and 70 per cent said they would pack it in within 10 years.
"Like everyone else," says federation policy analyst Lucie Charron, "retirement is on the minds of small- and medium-sized business owners."
The problem is that many may not have the means to make a smooth transition from the business world to the golf course.
A second CFIB membership survey conducted last year revealed that nearly 70 per cent of the 22,000 respondents intend to fund their retirement through a combination of personal savings, the proceeds from the sale of their businesses and RRSPs. A mere 12 per cent indicated that they have a registered pension plan (RPP) that would cover them and their employees.
CFIB research shows that in 2003 only about 27 per cent of all private-sector workers were covered by RPPs, down from 35 per cent in 1977.
By comparison, 86 per cent of public-sector workers were covered by such plans. Civil servants and others in tax-supported institutions such as schools, municipal governments and hospitals enjoy two other advantages.
Their plans are more generous than those of the private sector and they are guaranteed by their employers, meaning the taxpayer. This helps explain why workers in the public sector have been driving the trend toward early retirement.
Between 1997 and 2005, just over 40 per cent of all employees left the workforce before age 65, but the trends are much different in the public and private spheres.
In the late 1990s, the number of public employees taking early retirement peaked at almost 65 per cent before falling back to 56 per cent in 2005.
Only 33 per cent of private-sector workers were leaving early and just 20 per cent of those who were self-employed.
People who work for themselves tend to retire, on average, at age 66, and that hasn't changed since the mid-1970s.
The average age of retirement for all private-sector employees has fallen from 65 to 62. By comparison, those in the public sector now quit work at age 59, down from 64 three decades ago.
All this is possible, according to the CFIB, because public-sector pension plans draw upon the resources of all Canadians.
"It is frustrating and unfair for taxpayers who have a less generous plan or no plan to pay high taxes in order to subsidize the very generous public-sector plans," says Charron.
The question is: What can be done?
CFIB says the gap between public and private should be closed, but the federation isn't sure how that can be achieved. At this point, adds Charron, the objective is to raise awareness and create some discussion.
In the meantime, she says owners of small to medium-sized businesses should have a succession plan in place since most will have to realize something from their companies if they ever hope to retire.
The federation has developed a succession kit, which is available through its website (www.cfib.ca), and it outlines a number of essential steps.
First, proprietors should put their plans on paper and should have a successor in mind, either a family member, an employee or an outside buyer.
They should develop a timeframe for making the transition to retirement and should work out with a financial adviser the tax treatment of various alternatives.
In the long run, though, policymakers should take stock of the inequities between public- and private-sector pensions and do something about it, says Charron.
"Canada's pension predicament is one of fairness," she argues. "There is no valid reason why Canadian taxpayers are on the hook for public-sector pension plans when half of the Canadians working in the private sector do not even benefit from any pension plan upon retirement."
Not only that, these inequities make government employment attractive and lure people from the private sector. They erode the entrepreneurial spirit that drives economic growth and serves as the cornerstone of Canada's prosperity.
(D'Arcy Jenish can be reached at jenish@businessedge.ca)
