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