Pension tension alert!

November 12, 2011

Posted in Brantford Expositor, Calgary Sun, Edmonton Sun,

13 July 2011


Canada’s public pension system isn’t fair or sustainable, says the country’s small business association, which is launching a major campaign to highlight what it calls a looming pension crisis.

The nation’s public sector workers, which account for about 20% of the working population, get pension benefits that those in the private sector can only dream of. The trouble is the government can’t pay for them.

The C.D. Howe Institute says the federal government’s pension shortfall, or the difference between what it has in pension funds and what it has pledged to pay out to bureaucrats, the army and Mounties, stands at some $208 billion. That’s $65 billion more than listed in the government’s accounts, the think-tank says.

“Our major objective is to warn Canadians of the looming pension crisis,” said Dan Kelly, senior vice president of legal affairs at the Canadian Federation of Independent Business. “We are patting ourselves too hard on the back. We only have a few years to try to get this back on track to ensure the costs of public pensions are more reasonable before civil servants in Canada face the same fate as the U.S.”

Bill Tufts, a Burlington, Ont., benefits specialist who advises small businesses on pensions and other benefits said most Canadians aren’t aware that their taxes are funding such generous pensions for public workers when they scrimp to save enough for retirement.

“When you explain their jaws drop, they turn white and begin to quake,” said Tufts who has written a book on the subject called Pension Ponzi to be published in September.

The problem needs to be tackled now as Canada’s baby-boomer generation begins to retire swelling the numbers of those receiving benefits compared with the workforce left to pay.

About 1,000 boomers will retire every day from this year onwards. The shrinking workforce will cut the number of workers helping fund benefits from four to one retiree now to about 2.2 workers over the next two decades.

Only about 20% of the private sector workforce has any form of company pension with Canadians relying primarily on savings from their RRSPs and payouts from the Canada Pension Plan and Old Age Security schemes.

Repeated studies have shown that those funds aren’t going to be enough to cover every day needs, raising alarm bells among policy makers.

It’s a different picture for government and municipal workers who are among the few in the country to receive defined benefits pensions, guaranteeing payments of about 70% of their salary on retirement.

Those who do have company pension plans usually have a so-called defined contribution scheme, a type of pay-as-you-go fund, that will pay out the amount accumulated on retirement with no guarantees.

Kelly said the CFIB is not asking for earned pensions to be yanked away or existing plans to be gutted.

“What we are saying is that we should be taking away some of the excesses and making sure they are paying fair contributions,” he said. “New civil servants should be on a more reasonable track similar to the rest of the country.”

The association, which represents more than 100,000 of the country’s small businesses, also wants public sector workers to increase the amount they actually contribute to 50% of the amount paid in and to scale back perks such as early retirement

Currently federal workers usually only pay just over a third of their contributions with government making up the remainder from taxpayer cash, Kelly said.

The long-term campaign, dubbed Pension Tension, started last week with an alert to members which generated more than 1,000 responses in the first few days.

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