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Cutting pensions is a short-term gain, but it results in long-term pain for many.
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Take the Canadian Union of Postal Workers (CUPW), which recently reached a tentative agreement with Canada Post. Even though Canada Post faces a pension shortfall of $6.2 billion, all reports suggest that CUPW did not make any concessions on defined-benefit pensions.
Without substantial reform, status quo defined benefit plans for government employees are akin to a blank cheque, awarded by governments decades in advance but signed by taxpayers every year. No wonder government employee unions, such as the ones who sponsored the Canadian Public Pension Leadership Council report, dislike reform.
By again kicking the existing unfunded pension liabilities down the road, the province has exposed taxpayers to future risks and more bailouts, obvious or hidden. The government has also demonstrated that the theory about political behaviour -- politicians mostly act in their own short-term electoral interest and not in the long-term interest of the public -- is regrettably true more often than not.
The government/private sector pension disparity is a problem. Defined benefit pensions promise enrollees guaranteed benefits at a certain retirement age. But when existing contributions and the returns hoped for do not materialize, taxpayers without such guarantees must bail out government plans because of the promised benefits.
My colleague Kenneth Green and I wrote about how by approving fracking for oil and gas, some provinces might generate extra dollars for their provincial coffers. And the response from someone at the Halifax chapter of the Sierra Club? That fracking has caused "a 62 per cent increase in sexually transmitted infections."
The government sector in Alberta is unhappy and they want Premier Alison Redford and her colleagues to know it. Universities are advertising against provincial reductions in their funding; government unions are activating their members about proposed pension changes, reforms that would make them more akin to the private sector and less like a taxpayer-funded entitlement.
Whether one-time bailouts or multiple hikes in pension contribution rates, tax dollars are still used to top up public sector plans, and this is because plan members are guaranteed a certain level of benefits in retirement. And that's the real problem: taxpayers, most of whom do not have a registered defined benefit plan, end up paying for pension promises to government employees' unions.
Such reforms and others are long overdue and the finance minister and his colleagues should be commended for starting to tackle the difficult issue of public sector pension reform. They still have a long way to go though.
Canadians routinely hear about alleged growing divides in Canadian society. But here is one rift that often goes unmentioned: the divide between the pension benefits of public sector employees and everyone else.
Such inequality incurs real costs, where ordinary taxpayers pay ever more for above-market, guaranteed pension benefits that ever fewer in the private sector possess.
I read an article the other day that brought up a problem that sadly, happens more than we think; dying before you collect Canada Pension Plan (CPP) retirement benefits. The message was clear and correct -- a lot of people contribute a lot of money into CPP and never receive an income payment. Is this fair? I don't think so.
When it comes to dealing with money, there are two simple ways to break it down: things you can control and things you can't. Once you understand the things that you can control, the next thing is to "try" not to worry about the things you can't. Here are my top five ways to take control.
It is clearer than ever that most Canadians have to fend for themselves when it comes to retirement. For most retired Canadians, the combination of an employer's Defined Benefit Pension Plan, CPP and Old Age Security (OAS) provided them with a secure retirement lifestyle. This is not the case in 2013. Why?