"In the months ahead," the Finance Minister was remarking, "legislation will be introduced to put in place the Seniors Benefit which, in the early years of the next century, will replace the current system of Old Age Security and the Guaranteed Income Supplement." The head nodded -- it had been at least an hour since the speech began -- then snapped back: wait a minute. Hadn't the last budget promised the same thing? Indeed it had: "legislation to be put before Parliament" would give effect to the Seniors Benefit -- "in 2001," what is more, not some unspecified point in the next century. And this was itself merely a rehash of the plan unveiled in the 1996 budget, the broad outlines of which were contained in the 1995 budget ("to take effect in 1997"), as first promised in the 1994 budget.

Indeed, governments have been trying to come to grips with the rising cost of public pensions since as long ago as 1985, the year of the Tories' infamous, and ill-fated, attempt to de-index benefits. As the latest delay suggests, they still haven't got it right.

In point of fact, all three pillars of Canada's system of retirement income support are looking a little wobbly these days -- not only the Seniors Benefit, but also the Canada Pension Plan and private RRSPs. All are in serious need of repair, not least from the effects of the present government's efforts to "reform" them.

The Seniors Benefit has attracted the most scathing reviews. Where the universal OAS scheme was mocked for paying benefits to bank presidents -- even with the advent of the clawback in 1990, households with incomes as high as $170,000 still receive some benefit -- the new plan is faulted, curiously, for not being universal enough. That is, benefits are taxed back at such punishingly high rates that middle-income earners would seem to have very little incentive to save for their retirement.

As originally designed, the Seniors Benefit would be taxed back at a rate of 50 cents for every dollar of outside income up to $12,520 (for single pensioners) or $16,240 (for couples). But the real wallop actually hits those a little higher up the income ladder: on incomes of more than $25,921, the taxback rate is 20 per cent -- on top of regular income taxes. In effect, the middle class wage-earner who pays 40 per cent tax on each extra dollar (federal and provincial combined) during his working life would find himself in a 60 per cent tax bracket in retirement.

Smoothing out the bumps in the tax-back schedule will not be easy: the more gradual the rate, the more costly the program, especially in future years, as the retirement-age population explodes. A more immediate concern is the Canada Pension Plan, or more precisely the Canada Pension Plan Investment Fund, as mandated by recent legislation. While much early controversy surrounded the sharp increase in CPP contributions federal and provincial finance ministers have agreed to impose over the next six years, the real issue has always been how these are to be invested.

Senate committee hearings looking into the composition and mandate of the board that will invest the fund have brought this to light. It will be problematic enough to implement the "passive" investment strategy envisaged for the fund's first three years, under which it will buy a wide range of stocks in an attempt to mimic the broad market indexes. With the CPP projected to have more than $100-billion under management within a decade, it will be like no other index fund in its impact on the markets.

But the difficulties of maintaining a passive investing stance are insignificant compared to the hazards connected with an actively managed fund. Leave aside the massive distortion of capital flows this Godzilla would leave with each sweep of its tail: how long would it be before such a centrally administered, politically controlled fund would be exhorted to invest more in certain regions, or certain sectors? When could we expect the first audit of how much of its portfolio had been invested in firms controlled by members of certain races, or certain genders?

Neither of these broad policy conundrums are insoluble. Indeed, the problems of both the Seniors Benefit and the CPP could be alleviated in large degree by a liberalization of the third pillar of the pension system, private savings plans. If Canadians were allowed to save more in their RRSPs, tax-free, the tax-back of the Seniors Benefit would not bite so hard.

If the increase in CPP contributions were directed, not into the CPP kitty, but into each individual's RRSP, there would be no fear of politically-motivated misinvestments.

Yet not only has the government made no move to encourage private savings, it has actually tightened the rules. Maybe that reform will have to wait until the next century, too.