Guelph University must reform pensions

June 2, 2011

There was an interesting article about the pension problems at the university.–u-of-g-receives-pension-relief

In an ever more competitive globalized economy there is an urgent need for Canada to produce high quality university graduates.

Financial problems at the university stem from pensions that are unsustainable and are in dire need a permanent solution. The gold-plated pensions at the university need to be replaced with pensions that are both fair to employees, taxpayers and to future students who will cover the cost of them through higher tuition.

Pension costs have skyrocketed at the university and the contributions currently being made are proving to be woefully inadequate. In 2002 the contributions into the pension plans were $8.1 million, last year the contributions into the plans were university $34 million.

It appears that the university has just obtained relief to postpone an extra payment of $97 million that were required to be made this year and will instead pay $36 million for the next 3 years.

The numbers just do not add up.

A common understanding of the plan is necessary for an informed debate among all stakeholders including employees, taxpayers and students. The average pensions paid last year were in the range of $23,000 last year not the $10,000 mentioned by the union president. These include retirees who retired 30 years ago. Pensions for new retirees last year were much much higher.

The biggest driver of the cost of pensions is the rising costs of wages. Pensions are targeted to pay 70% of the final average retiring salaries of employees. Guelph is on track to pay some pretty sweet pensions. In 2010 over 600 employees earned over $100,000 about double the number since 2005.

Last year the university had to cut positions to pay for pensions and benefits, despite the fact enrollment increased by over 1,000 students. We are now seeing the conflict plaguing all government organizations. It is the choice between more services for students or more gold-plated benefits for management and staff.

The university has bought itself some time. It needs to make some hard decisions and move towards a long term solution. The current system is unsustainable for taxpayers, It is unfair for current workers who will have to pay for retired employees, it threatens the level of service and a real risk is the plans could run out of money.

Statscan reports that the average student debt on graduation is over $19,000. Also the proportion of student borrowers who graduated with debt loads of at least $25,000 is over 27%. Is it fair for student to borrow to fund pension plans for very well paid employees of the university? You would think with these salaries they could save for their own retirement!

Forcing student to borrow to pay tuition is not fair, where do you think the money is going to; pensions or services?

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