Pensions and a reasonable standard of living

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An attack on defined benefit pension plans in general, and public sector pension plans in particular, is occurring in this country and has spread to our province.

This attack is being promoted through the right wing agenda of the Harper government and led by the Canadian Federation of Independent Business and is now endorsed by the local employers’ council. We should all be worried that the propaganda being spread and fueled by greed and disregard for the average Canadian worker will take hold in the minds of the general public.

This approach is shortsighted. Rather, we should be supporting efforts to sustain defined benefit pension plans and enhancement of the Canada Pension Plan (CPP) so that all Canadians in their senior years can avoid poverty and reliance on government subsidies.

Let’s acknowledge the fact that most Canadians don’t voluntarily save enough money to fund their own retirement.

That explains the current need for government assistance programs such as Old Age Security and the Guaranteed Income Security (GIS), funded exclusively by taxes to assist our seniors who did not belong to defined benefit plans or who perhaps worked for independent businesses that didn’t care enough for their workers to participate in a retirement plan.

Of course, there are many individuals who don’t have the means or circumstance to save for retirement and will always require the assistance of government and tax dollars to make ends meet in retirement — we should be proud to live in a country and province that assists these seniors.

On the other hand, workers who are members of mandatory defined benefit pension plans have usually accrued sufficient benefit through contributions and investment throughout their careers that they do not have to avail of the GIS and other government subsidies.

If the Employers’ Council and the Canadian Federation of Independent Business have their way and convince enough people and policymakers to adopt their biased slant against mandatory defined benefits, the number of people reliant on government for subsidy in retirement will increase, along with an increase in poverty rates for Canadian seniors.

The creation of the CPP in the 1960s and the existence of defined benefit pension plans were instrumental in eradicating widespread elder poverty.

Without an enhancement to CPP and a commitment to existing defined benefit plans, the incidence of elder poverty as a widespread problem will reoccur. We are already beginning to see this trend. Mandatory defined benefit plans, including the Canada Pension Plan (CPP) and public sector plans, were designed to provide a defined level of income for workers upon retirement and are funded by mandatory contributions by workers which are hopefully matched by the employer as part of the worker’s negotiated wages or benefits.

These contributions are invested in accordance with actuarial projections and legislated rules which are meant to ensure that the pension funds are sufficient to pay for the benefits.

Unfortunately, the economic collapse in 2008 — caused by the big banks and corporate greed incidentally — put considerable strains on these plans. Markets have recovered significantly with annual returns in excess of 20 per cent in 2013, and funding levels of defined benefit pension plans are improving.

The Employers’ Council and the Federation of Independent Business are against mandatory pension plans in general, against public sector pension plans specifically, and even against improving the Canada Pension Plan benefits and claim that these are payroll taxes or funded by taxpayers.

Defined benefit public sector plans are not designed or generally funded by taxpayers, as these groups would have you believe. As an example, I belong to a pension plan and pay 9.35 per cent of my salary, matched by the employer, for this benefit.

The contributions by both me and the employer are negotiated as part of compensation for work performed, and are not gifts from the employer. In addition, you and I pay almost five per cent of our salaries, matched by our employers, to the Canada Pension Plan as part of our wages for work performed.

In total, counting employee and employer matching contributions, that is about 28 per cent of my annual salary going into pension funds every year to pay for my pension upon retirement.

We agree that pension deficits present a challenging and significant problem. A review of public sector pension plans to ensure their sustainability is probably in order.

We commend Premier Tom Marshall (in his former role as Minister of Finance) and the current government for their commitment to defined benefit plans and for seeking a collaborative solution with teachers and public sector workers to the pension funding concerns.

We further commend Premier Marshall and the government in their support for an enhanced CPP. Let’s hope that the provinces can get past the shortsightedness of groups like the Employers’ Council and the Harper government so that all Canadians have an opportunity to afford retirement, not just public sector workers and wealthy business owners.

Let’s not buy the rhetoric that defined benefit pension plans or the CPP are unsustainable, when in fact the motivation for these statements is that some employers don’t want to be required to participate in their employees’ efforts to afford to retire with a reasonable standard of living.

Let’s ensure that Canada remains a country where its seniors can afford to live without the indignity of poverty after a lifetime of work and contribution to society.

Don Ash is the executive director of

the Newfoundland and Labrador

Teachers’ Association.

Organizations: Canadian Federation of Independent Business, Guaranteed Income Security, Old Age Security Newfoundland and Labrador Teachers

Geographic location: Canada

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Recent comments

  • JP
    March 05, 2014 - 09:07

    The problem is that unions don't have to care about where the money comes from- that's someone else's problem. I fully agree that more benefits would be lovely but that money comes from somewhere. In the case of teacher's pensions, that is largely going to be coming from taxpayers many of whom do not have such generous wages, pensions, benefits, sick leave, vacation, job security, etc.

    March 04, 2014 - 22:23

    Mr Ash: I respectfully ask you to take off your NLTA hat for a moment, step back and take a deep breath. The rest of the taxpayers of the province who are not employed by governments are no longer prepared to GUARANTEE defined benefit pensions for public servants. The risk is placed squarely on ONLY the taxpayer if the actuarial forecasts don't materialize. he crash of 2008 can happen again and your statement that recent years have seen 20% gains is misleading. In September 2008, the TSX peaked at around 15,300. It is NO WHERE CLOSE to that figure today so most pension funds are still below water. It's time public servants shouldered the risk like the private sector. The shareholders (taxpayers) of the province and the country can no longer afford you. Grow up,. It's nearly over. You've all had a great ride.

  • Dolf
    March 04, 2014 - 12:28

    The impression out there is it's the unionized Joe and Jane Lunchbuckets who are the sole beneficiaries of the Public Service Pension Plan. Don't forget our less than honorable MHA's and buereaucrats, past and present, and their more than lucrative pensions. And of course the private sector corporate greed is a matter of record.

  • Mike
    March 04, 2014 - 11:06

    Who wants to make a waiger with me on whether or not something will be done to correct the pension issue by the current government? Tom Marshall has been the finance minister since 2009 and prior for another two year stint. He's now premier and still doesn't have the guts to deal with this issue. I bet ya it will be in the blue book for the next election?

  • John
    March 04, 2014 - 10:11

    The teachers can go pound salt. They typically retire in their mid fifties while the rest of us poor sods work up to or beyond retirement age to help support their gold plated pension plan. Time for detention here.

    • VOR
      March 04, 2014 - 10:48

      If you feel so strongly about the 'perk' teachers get, then why don't you become one? I know some teachers and to a person they are stressed out and over-worked. While John might think it's easy to be critical of the pensions, in reality he is just regurgitating the Harper 'race to the bottom' agenda. I guess the next logical step would be to teach our children via Skype from Bangladesh!

    • darrell
      March 04, 2014 - 22:40

      By the sounds of it, your teachers didn't do a good job trying to educate you. Loser.

  • Blair
    March 04, 2014 - 09:03

    The Greed of so called TEACHERS has no bounds.

  • Mike
    March 04, 2014 - 08:52

    Excuse me Don, but where in the private sector can I find an employer that will match my 9.25% contribution? It doesn't exist! With corporate greed being fueled by the support of present day leadership most private sector employers are reducing benefits while public sector employees are basking in gold plated plans. No public service plan should be matched to the tune of 9.25%!!!! That's ridiculous! The best case scenario anywhere in the real world is 5 for 5.

  • Mike
    March 04, 2014 - 08:50

    Excuse me Don, but where in the private sector can I find an employer that will match my 9.25% contribution? It doesn't exist! With corporate greed being fueled by the support of present day leadership most private sector employers are reducing benefits while public sector employees are basking in gold plated plans. No public service plan should be matched to the tune of 9.25%!!!! That's ridiculous! The best case scenario anywhere in the real world is 5 for 5.

    • Joe
      March 04, 2014 - 10:32

      Mike why don't you check with Newfoundland Power Limited.

    • Mike
      March 04, 2014 - 10:58

      Joe, last time I checked Newfoundland Power was a Public Utility Company. Public, not private!

    • Reg
      March 04, 2014 - 13:26

      Mike, you need to check again. NL Power is 100% privately owned and always has been. Since 1987 it has been owned by the shareholders of Fortis Inc.

  • Sparky
    March 04, 2014 - 07:14

    Mr. Ash, The point of the pensions is that they are too lucrative and the taxpayer who doesn't get the same beneift has to pay for it. Teachers retiring at the age of 47or even 50-51 (30 years in) and get 60% for the rest of their life is a huge benefit. The amount of tmoney they paid into the pension is not enough considering these low interest rate times. People in the private industry are stuggling to save for their own retirment and then they have to save for your too??? if you think it's a great plan make it independant and manage it yourself with no backstop from the government.

    • Chantal
      March 04, 2014 - 07:51

      Yes. The BMO has some interesting plans. What could possibly go wrong?

    • Joe
      March 04, 2014 - 08:55

      ??????? "Sparky" Is that supposed to mean your a live wire? One thing that is left out by the Board of Trade and other right wing groups is that the province pays investment groups large amounts of money to investment the employee and employer contributions so that there will be enough money to pay these pensions. Government then pay more money to other investment companies to evaluate the performance of the original companies. So we now have the question "Why are private companies employed to look after these pension plans failing at their jobs?" Is it that corporations are by there very nature incompetent?

    • W Bagg
      March 04, 2014 - 14:36

      pretty sure no one can collect pension until age 55 under all the provincial plans. Even if u get 30 yrs prior to 55, you still have to wait for age. But keep making it up if you want. Even MHAs have to wait.