On March 4, The Telegram published an article which began by announcing that “An attack on public sector pension plans is occurring in this country and has spread to our province.”
On March 28, I attended a St. John’s Board of Trade luncheon which featured a speaker launching such an attack. The speaker and, apparently, the Board of Trade, advocate for the elimination of defined benefit pension plans, arguing that public sector pensions should be converted into defined contribution, RRSP-type plans.
The existence of such extreme right-wing positions is not surprising. What is surprising, and disappointing, is the support demonstrated by the Board of Trade for a perspective and presentation filled with misinformation, half-truths, inaccuracy and a lack of balance. What is even more alarming is the Board of Trade’s choice to completely ignore the drastic and negative implications for the economy if public sector and defined benefit pension plans were eliminated.
There are important facts about pensions that should not be ignored when considering what is best for the economy:
‰ Pensioners pay taxes — to the tune of a $14 billion to $16 billion annual contribution to the Canadian government coffers.
‰ Pensioners contribute $56 billion to $63 billion annually in spending to the Canadian economy. A reduction in pensioners’ income would be most keenly felt and have the greatest impact on a small-market economy with a more elderly population base such as that which exists in Newfoundland and Labrador.
‰ More than 50 per cent of seniors without pensions in Newfoundland and Labrador rely on taxpayer-funded government financial assistance. By comparison, less than five per cent of the province’s elderly who have defined benefit pensions require such support.
‰ The teachers’ and public sector pension plan funds in Newfoundland and Labrador had an investment return of 22.28 per cent last year (an 11.56 per cent five-year annual return), which resulted in a $1-billion increase in the funds even after pensions were paid out.
‰ Pension plans are designed in such a manner that, for every $1 paid out in pension, $0.70 should come from investments, $0.15 from employee premiums, and only $0.15 from the employer’s contributions;
‰ Pensions provide for adequate income in retirement years, which means a lower rate of poverty amongst the elderly, less reliance on government-funded financial assistance, and a strong deferred tax base for government.
‰ Public sector pension plans, including the CPP, are highly regulated with efficient, low-cost operations and lower investment fees than RRSP arrangements, which put more money in the hands of retirees.
‰ Pension plan funds are invested in Canadian markets and communities, providing long-term capital for investment in infrastructure, bonds, real estate and private equity.
I have great respect for the business community and expect that business people will make decisions on the basis of factual analysis. However, I also appreciate that profit is the primary motivator for business.
I can therefore understand when groups that represent the interests of business speak against things which have an impact on profitability in the short term, despite the fact that those same programs and initiatives are good for employees and society in the long term.
Mandatory pension plans which require employer contribution, enhanced CPP benefits through increased premiums and increases in the minimum wage (all of which enable us ordinary Canadian citizens to live and retire with a reasonable standard of living and minimal reliance on government subsidized assistance) are all opposed by the Board of Trade and Newfoundland and Labrador Employers’ Council.
Pensions and retirement income are very complicated affairs. Government and the groups representing pension plan members rely on the expertise of pension experts, actuaries and lawyers to advise and assist them in discussions aimed at solving the pension problem and ensuring the long-term sustainability of provincial public sector pension plans.
The government of Newfoundland and Labrador recognizes the value and importance of public sector pension plans for both its employees and the future economy of this province. Premier Tom Marshall, on behalf of the government of Newfoundland and Labrador has publicly expressed commitment to its employees and the sustainability of defined benefit plans.
In contrast, Sharon Horan, chair of the Board of Trade, and Richard Alexander of the Employers’ Council continue to attack public sector pension plans under the guise of representing the best interests of “taxpayers.”
Make no mistake — neither of these individuals nor the organizations they speak for represent the taxpayers of this province. They represent the interests of business owners and employers, and everyone should note this difference.
Horan’s advice on public sector pensions is equivalent, and about as sound, as me giving advice on orthotics.
I’ll leave the orthotics advice to Horan and she, in turn, should leave the advice on public sector pensions to the parties involved — government and the public sector employees who are members of these plans.
I respectfully propose that the Board of Trade and the Employers’ Council should cease and desist in their ill-informed and misguided attack on public sector pension plans and on the retirees who spend their hard-earned pension dollars in the businesses owned and operated by the people the Board of Trade and Employers’ Council are supposed to represent.
Rather than promoting “pension envy,” I suggest they concentrate their efforts on addressing the real problem — helping their own employees achieve adequate retirement savings, pension income, or CPP benefits so that they are able to afford a reasonable standard of living in retirement.
Don Ash is the executive director
of the Newfoundland and Labrador
He writes from St. John’s.