Pension reform, what’s good for some should be good for all
December 8, 2016
This came to light recently because of proposed changes in workplace pensions for federally regulated employers. That includes crown corporations, banks, and transportation companies.
It will affect 12,000 federally regulated organizations consisting of 820,000 employees. It does not include employees of the federal government.
Currently there are two different forms of pensions. The best is a defined benefit (DB) plan.
A DB pays a retired employee a specific amount of retirement income for the rest of their life.
A defined contribution (DC) plan specifies an amount of money that is invested in the employee’s retirement fund, but the employee assumes the investment risk.
If the pension investments perform poorly, the retired employee is at risk of not having enough funds for retirement. Unlike the DB, where the employee is assured they will receive a specified amount.
Employers do not like taking such a long-term risk with retired employees, so for decades companies have been shifting their DB plans to DC plans.
The proposed new regulation will see a middle ground. A “shared-risk” plan called a target-benefit plan.
A target pension benefit is established, but if the pension investments do not perform well then the risk of lower pension benefits is shared between the employer and retired employee.
In summary, the first part of this article covers how pensions work.
That is not the important issue.
It is important to see the unfairness of Canada’s pensions. About 85 per cent of Canadians do not have a pension.
Most individuals who have a pension work for the government or a Crown Corporation, which most people consider to be the government.
There are a few large, non-government firms, like banks and car manufactures that offer pensions, but for most other sectors of the economy there is no employment pension.
My question is simple.
If pensions are good for government workers, then why are they not good for the rest of the population?
I think I have the answer.
Unions negotiate on behalf of government workers and the government has met their demands for pension coverage.
That system is entirely outdated.
People are equal and whether an employee is represented by a union or not, all people should be treated fairly.
If pensions are good for some workers, they are good for all.
Canada should move out of the dark ages and standardize pension benefits for every citizen regardless of where they happen to work.