C.D. Howe Institute : Further Reforms to Federal Pensions Required – November 3, 2012

CFN – While Ottawa’s proposed reforms to the pension plans of federal employees and MPs are a move in the right direction, the deep flaws in these plans require more fundamental revisions, according to a report released today by the C.D. Howe Institute. In “Federal Employee Pension Reforms: First Steps – on a Much Longer Journey,” authors William B.P. Robson and Alexandre Laurin argue that more sweeping reforms are needed to achieve better funding and a more reasonable division of obligations and risks between taxpayers and public servants.

“The guaranteed incomes those plans promise participants are far more valuable, and their costs and obligations on taxpayers are far larger, than reported,” said Robson, President of the Institute.


Currently before Parliament, the new provisions include increasing employee contributions to the plans and raising eligibility ages for new employees’ benefits. “The prospective increases in employee contributions would start saving taxpayers money in the short term, and raising eligibility ages for new employees’ benefits will reduce the growth of these plans’ liabilities in years to come,” said Laurin, the Institute’s Associate Director of Research.


“But the flaws in Ottawa’s employee pension plans are so serious that these steps should – and almost certainly will – not be the end of the journey.”


The authors find:

  • The annual accumulations of wealth in these plans are now much higher than their reported current service costs, meaning that employee contributions will fall far short of their advertised 50-percent share
  • Taxpayers will still bear more than half of the risk of changes in the cost of new obligations and – more important – the entire risk of changes in the cost of servicing past obligations unless the federal plans are converted to target-benefit plans in which benefits adjust depending on funding.
  • Federal employees now get tax-deferred saving that is triple or more what Canadians contributing to defined-contribution pension plans or RRSPs get, an unjustifiable unevenness in treatment.
  • The proposed reforms will still leave the MPs’ plan completely unfunded, which weakens parliamentarians’ moral authority to lead Canadian pension reforms.

For the report go to: http://www.cdhowe.org/federal-employee-pension-reforms-first-steps-on-a-much-longer-journey/19517

SOURCE: C.D. Howe Institute

Moustache Joes

1 Comment

  1. Absolute nonsense, CD Howe. The 50-50 split is mandated and the government does not have any obligation beyond that (despite having, in 1999, taken 29 billion of employee savings from the fund to supplement general tax revenues). Changing to a defined target pension plan has zero effect on the cost to the employer of the pension payments (which are all part of the employee compensation anyways) and has no benefit to the one saving for his retirement.
    They carefully don’t mention that the tax benefits and savings benefits of DB plans are for the benefit of those saving for their retirement and the inefficiencies and additional costs of RRSPs versus the DB model. CD won’t mention this because their constituents, the financial services industry, makes billions annualy from those inefficiencies in the RRSP model and they surely don’t want to lose that income just so Canadians have a better savings options for their retirement!

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