September 24, 2013
Re: B.C. must address problem of public service pension plans, Editorial, Sept. 20
Friday’s editorial painted an inaccurate picture of the state of B.C. public sector pensions. Significant reforms B.C. made to pension plans in the early 2000s have made them fully funded, affordable and sustainable — the model to which others look for a well-managed pension system.
Earlier this week, Moody’s Investors Services declared that our public sector pension system is a source of strength for B.C.’s triple-A credit rating — a claim few other provinces can make.
Legislation and the joint trust agreements require the plans to be fully funded, and they are. Investment returns even in the recent economic downturn out-performed private sector fund managers. Overall, investment returns and employee contributions fund between 85 to 90 per cent of public sector pension payouts. Employer/taxpayer contributions amount to 10 to 15 per cent. [EXPAND Read more]
B.C. public sector pensions are modest. The average annual B.C. public sector pension in 2012 was between $16,000 and $30,000, while the average annual wage in B.C. was $43,000.
A recent Moody’s Investors Service report on international public sector pensions found B.C. had one of the lowest pension liabilities as a share of revenue at three per cent. Contrast this with Alberta’s liabilities at over 24 per cent and Saskatchewan’s liabilities at more than 55 per cent, and it’s clear why Moody’s has a positive view of B.C.’s public sector pension plans.
Some may think the way to solve the difference between public and private pensions is to tear down the former, rather than build up the latter. With our leadership on pooled registered pension plans, B.C. is working to help the private sector offer more pension options for workers.
The reforms New Brunswick and Alberta have proposed bring them somewhat closer to B.C.’s existing system. B.C. already is the program others are trying to match.
MICHAEL DE JONG, Minister of Finance
Defined benefit pensions are not a frivolous perk and portraying them as excessive or “gold-plated” ignores the value they have for workers and the overall Canadian economy.
Replacing defined benefit pension plans with inferior alternatives, such as defined contribution plans, will drive down all pension benefits. This will mean more seniors living in poverty, and more strain on government assistance programs for low-income seniors.
The Fraser Institute analysis of public sector pensions is fundamentally flawed. The period examined, starting in 2000, was a period of low interest rates bookended with the global economic crisis, leaving defined benefit pension plans with temporary and surmountable funding challenges.
The Fraser Institute conveniently ignores the period before 2000, when employers, including the B.C. government, benefited greatly from defined benefit pension plan surpluses. Particularly during the 1990s, employers were able to reduce, and even eliminate, their contributions to defined benefit pension plans.
Employers who benefited from surpluses and contribution holidays, including governments, cannot simply walk away from their responsibilities during the difficult times.
Defined benefit pensions are recovering from the global financial crisis. Financial markets and interest rates are trending up, and surveys show pension health is improving across Canada. Abandoning them is short-sighted and irresponsible of any employer, private or public sector.
Governments need to get past red herrings. We must concentrate on bringing retirement income security to those who need it most — the 11 million Canadians without a workplace pension plan.
This can most effectively and affordably be done with an expansion of the Canada Pension Plan. By gradually increasing contributions paid by employers and workers, we could double CPP benefits. This is a real solution to ensuring as many Canadians as possible can retire with dignity.
PAUL MOIST, National President, Canadian Union of Public Employees Ottawa
Recently there have been two articles in The Sun on B.C. government employees’ defined pension plans.
Don Cayo’s column (Are B.C’s public pensions really gold-plated?, Sept 17) investigated and reported on the viability of the B.C. government defined plans.
Vaughn Palmer’s column (B.C.’s rising debt catches Moody’s attention, Sept 18) reported on the findings of the Moody’s audit.
Both articles dispel the myths put forward by the Fraser Institute.
AL WILLIAMS, Port Coquitlam
Saskatchewan was ahead of its time in mandating a defined contribution pension plan to new hires in 1977. Our B.C. government needs to do the same. I was recently talking to a person who had worked for the B.C. government for only 10 years and he commented that he was embarrassed at how large his pension will be when he retires.
I am a long term employee of Catalyst Paper and a member of the company’s defined benefit plan which was closed three years ago. All employees are now defined contribution only. The company recently emerged from bankruptcy and offered all defined benefit plan members the option of a present value payout of the reduced value since the plan was underfunded by about 35 per cent. For some strange reason, active employees like me were to be taxed on a portion of the payout while retirees could roll the payout over to an annuity of their choice.
There are no guarantees in life, and private sector defined benefit plans are not bullet proof like government ones which are great for employees, but a tremendous burden on current and future taxpayers. It is never too late to change this, Christy Clark.
JIM BAYLES, Vancouver [/EXPAND]