Got a Defined Benefit Pension?

[Inverted2]

Looks like Turd-oh has just made it legal for employers to ax their DB pensions.

http://canadianlabour.ca/news/news-arch ... 7-betrayal

[CpnCrunch]

This makes sense. We've known for a long time that DB plans are a bad idea. Somewhat surprising that Trudeau introduced this though.

[Rockie]

This makes sense. We've known for a long time that DB plans are a bad idea. Somewhat surprising that Trudeau introduced this though.

I'll consider looking at it the day all MP's, MLA's and senior corporate executives voluntarily give up their DB pensions in a display of leadership by example.

[CpnCrunch]

This makes sense. We've known for a long time that DB plans are a bad idea. Somewhat surprising that Trudeau introduced this though.

I'll consider looking at it the day all MP's, MLA's and senior corporate executives voluntarily give up their DB pensions in a display of leadership by example.

Agreed. It will be interesting to see what they do about that.

A fairer approach would be to keep DB for existing pensions, but start a new plan for new hires. Isn't this what Air Canada did?

[Rockie]

This makes sense. We've known for a long time that DB plans are a bad idea. Somewhat surprising that Trudeau introduced this though.

I'll consider looking at it the day all MP's, MLA's and senior corporate executives voluntarily give up their DB pensions in a display of leadership by example.

Agreed. It will be interesting to see what they do about that.

A fairer approach would be to keep DB for existing pensions, but start a new plan for new hires. Isn't this what Air Canada did?

Yes it is. More accurately Air Canada said they wanted it and the union acquiesced. For a few years now new hires are on a defined contribution plan, but there are high hopes for a targeted benefit plan that will more closely resemble a DB plan. Details are above my head though.

[Woxof38]

"A fairer approach would be to keep DB for existing pensions, but start a new plan for new hires. Isn't this what Air Canada did?"
Nav Canada has also done this.

[rxl]

Bill C-27 is BS especially considering those with DB plans have had little to NO room to contribute to an RRSP thanks to the pension adjustment.

[Heliian]

I think you'll find that there are not too many left in this country.

The DB pension is no longer sustainable and left the employers with too much responsibility.

Just be happy that you have a pension outside of CPP and make your money work for you. I was skeptical at first but have found that I can be better off in the future if I handle my money accordingly.

Bill C-27 is BS especially considering those with DB plans have had little to NO room to contribute to an RRSP thanks to the pension adjustment

Hopefully, you will be able to compensate for the changes, you just might have to think beyond the RRSP.

[bigredone]

I can't seem to find the supporting article now but I believe, during the last Fed election, it stated that 70% of those eligible for a DB pension in Canada were Government employees. Municipal, Provincial or Federal. Sheesh!

[DanJ]

I can't seem to find the supporting article now but I believe, during the last Fed election, it stated that 70% of those eligible for a DB pension in Canada were Government employees. Municipal, Provincial or Federal. Sheesh!

That's not really surprising, when you think about the millions of civil servants out there, compared to how many are in the workforce, and how many of those would have pension plans, and then how many of those would be DB.

[DanJ]

Should also be pointed out that not all DB pensions are exactly gold plated. There still are various formulas for them. From $x dollars per month times years of service (and that could be a low amount), to a percentage of your highest earning x number of years, and I'm sure many other forumulas. And not all DC pensions are bad as some companies are more generous with matching contributions than others. I have a DB, but the monthly multiplier was pretty low until about 25 years ago. That amount has grown with each contract, but it's not retroactive. People retiring now are getting a pretty bad pension after 35 or 40 years. Mine will be so-so if I stay the next 15 years. Newcomers will have a great pension, baring any major changes.

[Posthumane]

There is a lot of bad feelings about DB pensions, but there is nothing inherently wrong with a DB approach if it's run properly. Just so we're all on the same page:

Defined contribution plan:
- Employee decides how much per year they will contribute to the plan
- Organization may match employees contribution amount up to a certain percentage
- Contributions are invested, either on by the individual or by a contracted financial institution
- When employee retires they are entitled to the entire investment portfolio to use how they choose, or payed out a certain amount per year until it is depleted.

Defined benefit plan:
- Organization chooses what the employee will be paid out upon retirement, either as a set amount, or as a percentage of their earnings, etc.
- Organization or contracted financial institution determines, based on predicted investment gains, the contribution amount to meet that target. They then determine what percentage of that the employee pays, and what percentage is the organizational match
- Employee's contribution is deducted from them and invested in the organization pool.
- When employee retires they get the monthly payout they were promised.

The fundamental differences between the two systems is
a) who takes the investment risk, and
b) who has control over the investments and rate of payout.
As mentioned, a DB plan is not necessarily a golden ticket. The amount that gets paid into my DB plan is about 10% of my income, with two thirds of that coming from my paycheque and one third is the organizational match. People with a defined contribution pension with the same match amount and contributing the same percentage of the pay to the pension are likely to do just as well in retirement as I would, if they invest the money smartly. The downside to that approach is it puts the onus on investing smartly on individuals, many of whom do not have any knowledge about how to invest.

Drawbacks to the DB plan, on the other hand, include a lack of control about how the money is used. For example, my pension is locked in to a certain age, so if I decide to retire early I can't use those savings without a subtantial penalty. Also, as soon as I start receiving CPP my pension payout is reduced by the same amount, whereas someone on a DC plan would continue receiving their normal payouts PLUS the CPP amount.

Arbitrarily reducing DB pension payouts from a system that someone has been paying into for years is akin to taking money out of someone's RRSP that they put in there, just because someone felt that the amount they had isn't fair.

The problem with (some) DB pensions is that many of them aren't correctly managed. Instead of the organization keeping an investment pool that is strictly for pension payouts (and consists entirely of pension contributions), many organizations have treated pension payouts as part of their general operating expenses. This leads to situations where newer employees are funding the pensions of older/retired employees in a never ending cycle, until something cracks.

[DanJ]

I forgot another big issue with C-27 to me is that Finance Minister Bill Morneau is the Morneau half of Morneau Sheppel, a company that manages many pension plans for companies. Sounds like a huge conflict of interest to me that he can promote this kind of legislation that can have a major impact on his client companies. That's the company that manages my employer's DB pension plan.

[complexintentions]

I agree with Posthumane that DB pensions in themselves are not a "bad idea" per se. But any discussion on DB versus DC pensions MUST recognize that public and private sector DB's are fundamentally different. When the employer is a private company, the employer's contributions come from the company's profits and so are ultimately determined by the financial viability of the company. When the employer is the Government of Canada, the employer's contributions come from taxpayer revenue. A government is not run for profit motive (nor should it be, although it should be run with the same sense of final responsibility!) thus the accountability is not there.

You want conflict of interest? Decades of vote-buying of public employees that have led to the situation Canada is in today, where public sector workers earn significantly more than their counterparts in the private sector. Getting what they negotiate, not what they deserve, as the saying goes. This leads to all sorts of market distortions on wages, as private companies try to compete with Crown corporations. Good luck with that. But the circle is now viciously self-perpetuating, as the public sector unions are too important for a government intent on remaining in power to ignore - more than 1 in 5 jobs are part of the broad public sector. So the public hiring continues, the private jobs are lost, and the private investment capital dries up. Down she goes. Can't depend on selling each other overpriced houses forever.

Lest anyone think this is the typical rant against "lazy government workers", it is not. Of course the government provides absolutely vital services. I have friends and family working in everything from the Navy to the school board. If anything this is just an observation on human self-interest.

All of which is to say, if this legislation is a first step to put some controls on public DB largesse, Bring It On. Before Canada is completely divided into two classes: those with government jobs and pensions, and everyone else. Or, private workers can just get used to working harder and longer so government workers can retire on an indexed pension.

Private sector workers earn less, work more: Report

Targeting the federal public sector would seem like a good start, given the disparity is the greatest there.

"Other highlights of the report include:

- The federal government had the largest compensation gap, with a salary premium of 13 per cent, growing to 33.2 per cent once benefits were accounted for;
- The salary premium for municipal employees was 8.9 per cent, growing to 22.3 per cent with benefits;
- The salary premium for provincial government employees was 5.5 per cent, growing to 21.2 per cent with benefits;
- Among the various public sectors, Canada Post employees had one of the biggest salary premiums of 16.6 per cent, growing to 36.9 per cent with benefits;
- For 2010, annual wages and salaries for the public sector ranged from $51,029 to $69,833, compared to $48,872 to $61,688 for private sector employees."

[DanJ]

I often wonder about these wage comparison studies. What are they comparing to? What are the comparable private sector jobs? A forklift driver at a government warehouse probably makes more than a forklift driver at a shoe distribution centre, but less than at an auto plant. What does an Air Force A310 captain make compared to an Air Canada 767 pilot? What is that Canada Post wage disparity being compared to? The kid who delivers Best Buy and Loblaws flyers after school? Canada Post letter carriers make less than private courier companies like UPS and Purolator (union) or Fedex (non-union). Maybe that 16% comes from management.

[Posthumane]

Dan, I've often wondered the same thing. There is a range of jobs in the public sector and a range of jobs in the private sector, but they don't overlap 100%.

There are definitely some jobs where public service employees make more than private, and typically they are on the lower end of the scale. Cooks, labourers, etc. from what I've seen make way more working for my department than they would in a private company. However, the public sector simply doesn't have many of the lowest level positions that drive down the average wage.

On the other hand, engineering and scientific staff tend to make less in the federal gov't compared to equipvalent private sector employees. I work as an engineer in the public sector and am still making less now after almost a decade in this job than a friend was making straight out of school working for a fertilizer manufacturer.

Complexintentions - it is not only the employer's pension contributions that come from different sources between public and private sectors, it is the employee's entire compensation package that does. Salary, health and dental benefits, retirement benefits, etc. But I don't think that means that public service compensation has any less accountability than private sector - if anything they tend to come under a lot more scrutiny. Any person can look up exactly how much I make on the treasury board site, what my benefits package is, and so on, whereas in the private sector this kind of information is often kept secret to the benefit of the company. This way they can negotiate completely different compensation packages for different employees doing the same job.

If people want public service employees to have the same benefit packages as equivalent private sector ones then that is fine - as long as that's agreed to from the start. If public service pensions get clawed back they might have a hard time attracting employees if they don't boost something else, but that's another story. However, if one of the conditions of employment was being offered a pension and the employee paid into it (without choise), then simply taking away the benefits is a form of theft from the employee.

[Wilbur]

I'm collecting a DB pension from a provincial government. The plan is well managed and fully funded with employees contributions fixed, and the government's share adjusted up or down from a defined benchmark % as determined necessary by the actuaries. In my 30+ years, I never saw the government's contribution adjusted up, but plenty of times it was reduced when stock markets were doing well. On the upside, the DB plan provides rock solid income security in retirement for as long as I live. On the downside, if you die the day after you retire, your lifetime of contributions stay with the plan and are lost to your estate. The problems with the funding for some DB plans lies in how they are managed. They should be managed at arms length so that companies and governments aren't allowed to forego their contribution share or give themselves cheap loans from the pension fund. The plan I belong to is run that way and is financially solid.

Comparisons between private sector and public sector pay rates are usually done by organizations with a bias. Some government work pays better than comparable private sector jobs, such as office clerks, but many others do not; especially skilled labour and management positions. Many other government workers have no comparable private sector jobs. There are no private sector police, firefighters, emergency RN's, psychiatric hospital staff, correctional officers, child protection social workers, etc, etc. Probably the easiest way to determine if they are over or under paid is to look at the number of vacant positions. I can say from experience that most government jobs do not attract long lists of qualified applicants. The hiring competitions I ran typically attracted no more than one or two qualified applicants, and when multiple positions were available, never enough to fill them all. Also contrary to popular belief, lots of people quit the skilled government jobs and go to the private sector for more money, even after factoring in benefits and pensions.

There is no magic to having a well funded retirement starting as early as in your 50's. Take 10-12% of every paycheck, put it in your RRSP, and build a well diversified investment portfolio. The key is doing it EVERY paycheck for your entire working life with no regard for other priorities you may have. That's how it worked for me and why I was retired at 55. My pension contribution came off every two weeks whether or not I could afford it.

[complexintentions]

Some good points made. I agree that a perfect comparison cannot be made between public and private sector wages, as some jobs are performed only by the government. But likewise there is no comparison to be made of a taxpayer-guaranteed, DB pension to what is available in the private sector. There's no need to claim bias, of course either side of an argument has some self-interest. Full disclosure: I do not work in Canada in either the public or private sector, I am simply offering what I observe. I do not envy any worker in Canada, I simply do not see the current system as sustainable.

But I don't think that means that public service compensation has any less accountability than private sector - if anything they tend to come under a lot more scrutiny. Any person can look up exactly how much I make on the treasury board site, what my benefits package is, and so on, whereas in the private sector this kind of information is often kept secret to the benefit of the company. This way they can negotiate completely different compensation packages for different employees doing the same job.

How do they "come under scrutiny"? You mean, taxpayers being able to see the "Sunshine Lists"? Consider also, that information is used to justify public sector contracts that use the highest level of compensation and benefits as the benchmark. Resulting in many smaller towns now running out of funding for their police, fire, medical, judicial staff as they demand pay in line with places with much higher costs of living. Sorry, but I actually believe employers should be free to negotiate different compensation packages based on what they can actually afford, consistent with the tax base and COL where they live, not what a union demands.

There are definitely some jobs where public service employees make more than private, and typically they are on the lower end of the scale. Cooks, labourers, etc. from what I've seen make way more working for my department than they would in a private company. However, the public sector simply doesn't have many of the lowest level positions that drive down the average wage.

On the other hand, engineering and scientific staff tend to make less in the federal gov't compared to equipvalent private sector employees. I work as an engineer in the public sector and am still making less now after almost a decade in this job than a friend was making straight out of school working for a fertilizer manufacturer.

How do you defend that "the public sector simply doesn't have many of the lowest level positions"? Most entry-level jobs in service and retail are minimum-wage, and in the private sector. If anything you're just confirming that the lower-skilled jobs in government are overpaid to what the market can bear. But when you say you're "making less" than the private sector, are you really factoring in the full value and security of a DB pension, or just looking strictly at salary?

Probably the easiest way to determine if they are over or under paid is to look at the number of vacant positions. I can say from experience that most government jobs do not attract long lists of qualified applicants. The hiring competitions I ran typically attracted no more than one or two qualified applicants, and when multiple positions were available, never enough to fill them all.

Really? As I said, I have friends/family in various government jobs, federal/provincial/municipal. There are rarely any job openings, and when they are, they are posted internally first, and usually filled instantly. On the rare occasions that they have to go to external posting, they're swamped with applicants. Which isn't to say that all of the applicants are viable, but trying to imply that most government jobs aren't incredibly sought-after is completely false. Of course demand goes up and down with the economy, just like private sector hiring.

Completely agree that people need to start taking responsibility for their own pensions. A good start would be public pension reform. (Preaching about saving 10-12% of one's paycheque would be more credible if you had done it voluntarily!) lol

[Posthumane]

Some good points made. I agree that a perfect comparison cannot be made between public and private sector wages, as some jobs are performed only by the government. But likewise there is no comparison to be made of a taxpayer-guaranteed, DB pension to what is available in the private sector. There's no need to claim bias, of course either side of an argument has some self-interest. Full disclosure: I do not work in Canada in either the public or private sector, I am simply offering what I observe. I do not envy any worker in Canada, I simply do not see the current system as sustainable.

What do you consider to be the current system, and which parts are not sustainable? As mentioned, there were/are some pensions that are poorly run, but at least the one I have experience with (federal gov't) is fully funded and managed by a financial institution, which means there is no further payouts directly from the gov't to the retired employee. Therefore it is not any more tax-payer guaranteed than any other pension. Now, that being said, the pensions that the ministers have work differently than those that the rest of us peons in the public service have, so maybe theirs aren't sustainable. I don't know. Perhaps you have more information about that than I do.

How do they "come under scrutiny"? You mean, taxpayers being able to see the "Sunshine Lists"? Consider also, that information is used to justify public sector contracts that use the highest level of compensation and benefits as the benchmark. Resulting in many smaller towns now running out of funding for their police, fire, medical, judicial staff as they demand pay in line with places with much higher costs of living. Sorry, but I actually believe employers should be free to negotiate different compensation packages based on what they can actually afford, consistent with the tax base and COL where they live, not what a union demands.

There's a lot more than "sunshine lists", any person can look up exactly what I (and every other federal employee) makes and what their total benefits are. And often they do. Look at all of the articles about every aspect of public servant pay and benefits and how many people there are arguing over them. Any time something gets changed it gets analyzed by politicians and the public at large. How many people scrutinize what an engineer working for Shell makes?

How do you defend that "the public sector simply doesn't have many of the lowest level positions"? Most entry-level jobs in service and retail are minimum-wage, and in the private sector.

Umm, that's exactly my point. Most entry level jobs are in the private sector, not in the public sector. Therefore, the average wage in the private sector across the board will be lower on account of there being a lot more entry level positions.

But when you say you're "making less" than the private sector, are you really factoring in the full value and security of a DB pension, or just looking strictly at salary?

I'm factoring in the full compensation package. The value of the pension is easy to calculate (and is done so annually). Not to mention that of the friends working in the private sector, many of them (the ones working for larger corporations) have an almost identical defined benefit pension plan to mine. Some of them may even be managed by the same financial institution, since there's only a handful of them in Canada that actually have such plans.

Really? As I said, I have friends/family in various government jobs, federal/provincial/municipal. There are rarely any job openings, and when they are, they are posted internally first, and usually filled instantly. On the rare occasions that they have to go to external posting, they're swamped with applicants. Which isn't to say that all of the applicants are viable, but trying to imply that most government jobs aren't incredibly sought-after is completely false. Of course demand goes up and down with the economy, just like private sector hiring.

Completely agree that people need to start taking responsibility for their own pensions. A good start would be public pension reform. (Preaching about saving 10-12% of one's paycheque would be more credible if you had done it voluntarily!) lol

This may vary regionally. My experience has been similar to Wilbur's - in trying to fill engineering positions, we rarely get more than a few applicants. In fact I've seen positions go unfilled simply because nobody applied with the required qualifications. I'm sure less specialized positions such as clerical jobs at the municipal level are more sought after though, as these do tend to pay better than equivalent administrative positions in private companies.

Btw, I save 25-30% of my paycheque voluntarily, on top of my pension contributions, so I think I have some credibility in that department. You shouldn't make too many assumptions.

[complexintentions]

I appreciate the reasonable tone of your rebuttal, and if your pension is indeed severed from public funds, I am impressed. Except that isn't actually true: your pension may be fully funded at the moment, but if in the future that isn't the case, who do you think will make up the shortfall? Your (former) employer, the Canadian government, aka the taxpayer. Given the demographics of retirees (7 million over the next 20 years) vs. workers and the number of government employees as a percentage of the entire workforce, pension shortfalls are a mathematical certainty unless benefits are reduced, taxes are increased, or people just start dying sooner lol. There's a good article on G&M entitled "Public pension ‘time bomb’ keeps experts awake at night" but unfortunately it's behind their paywall. Why do you think DB pensions are increasingly rare in the private sector and under pressure to convert to DC? They've realized it just won't work mathematically, and can't guarantee the pension funds won't run dry without the "bottomless well" of funds available to a government!

Hey, it's all academic to me, I have no illusions about collecting a Canadian pension beyond whatever CPP pittance they'll deposit to me outside the country when the time comes. I don't consider it whatsoever in my financial planning. I just like to chat about such things over coffee with a family friend who still plays with numbers (former chief actuary, Province of BC, retired). He's the credible one, not me.

You may describe yourself as a "peon", but I can assure you most private sector workers would be quite happy to have the dilemma faced by this lowly "servant of the people" featured in the linked article: should he take a 1.1 million dollar payout now and retire at 50, or tough it out to the ripe out age of 55 to get even more money? Oh, what to do, what to do...hahah! (Not one, but two DB pensions, yet they worry. Comical!)

Should this couple take the lump sum or the pension?

Not exactly a question the average Canadian private sector worker "peon" grapples with on a daily basis. You may claim your private sector counterpart makes more than you do - there is no easy way to prove or disprove this. But I do know the plural of anecdotes is not "data".

Here's a more recent re-examination of public vs. private compensation than the previous study I posted - yes, yes, I know, it's all biased haters...or is it? (That is addressed, actually):

Using Statistics Canada data from 2015, the study finds that government employees receive, on average, 10.6 per cent higher wages than comparable workers in the private sector. (This wage premium accounts for differences between individual workers in the two sectors such as age, gender, education, tenure, experience and type of work.)

Government workers keep getting richer off money taken from the rest of us

For the record, I am not a fan of the inflammatory "Us vs. Them" headline. But there are some pretty sobering numbers presented:

In 2015, 89.3 per cent of government-sector workers were covered by a registered pension compared to just 23.8 per cent of private-sector workers. Tellingly, virtually all government pensions (eight of 10) provide defined benefits, guaranteeing a certain income level in retirement, rather than being dependent on how investments perform.

Government-sector workers in Canada also retire 2.3 years earlier, on average, than private-sector workers and are away from their jobs for personal reasons (12.7 days) more often than private-sector workers (7.8 days).

When it comes to job security, another non-wage benefit, government workers have a distinct advantage. In 2015, 3.8 per cent of private-sector employment in Canada experienced job loss —approximately seven times higher than the 0.5 per cent of those in government-sector employment.

(I'm not even going to get into the productivity gap, that gets ugly!)

The bolded part is what I consider the "current system", and what I consider unsustainable. Guaranteeing income for decades to come for millions of people, based on variables that are completely unknown: investment returns, tax revenue, and inflation. Good thing governments never err in their projections, hmmm? I guess then, you have one of those 2 out of 10 pensions that is not "tax-payer guaranteed", as you say? You are definitely in the minority.

My quarrel with government compensation isn't with the workers, it's with the monopolistic environment it operates in and the astonishing entitlement it breeds. Risk should correlate to reward, but the government has distorted that immensely, to the detriment of economic sustainability.

Anyway apologies if I made assumptions about your saving habits, of course you may be very diligent - none of my business. I just call bs when people try to conflate mandatory deductions with self-discipline - kind of like "forced savers" presenting mortgage payments as a virtue - as if they have a choice if they want to keep their house! lol

[Posthumane]

I think there is a fundamental principle that we disagree on here, which you stated:
You believe that a guaranteed income upon retirement can't be sustainable. I believe it can, as long as it's managed properly. If a pension payout is calculated using conservative projections (as it should be) then most years actual investments will outperform the required metrics. This builds a buffer which helps against the down years. If you look at a properly funded pension, the annual payout is oftentimes lower than an equivalent portfolio with the same inputs and modest historical investment gains. Afterall, the CPP is in the same boat, as are pensions in the private sector. And in fact, a person who is saving a good amount for retirement (>10%) can create the same guarantee of income buy buyind guaranteed investments, but the caveat is the payout will be much lower than for risk adjusted investments so very few people choose that route.

So, looking at the example you posted, this couple is making $150k combined family income. They haven't had that income for their entire careers, so we have to assume an average that is lower, so let's say their average income over the years was $100k combined (I think this is a reasonable figure for a working couple over the last few decades). One of them is 57 and the other 49, so if they both started working seriously at their careers at 25 they have 56 working years between them, for an average of 28. If they contribute 12% of their income into an RRSP without ANY company matching, the expected value of their portfolio after 28 years would be around $968k. That's not quite as much as they quoted in the article as the commuted value, but it's not orders of magnitude off. Most major firms do offer things like a certain percentage RRSP match, even if they don't have any registered pensions. However, something about that article isn't adding up to me. If you retire at 50 in the federal gov't under the old system (under the new system the minimum is 55) your pension gets cut in half (5% per year for every year before the full pension age), including the commuted value. I guess he's not a fed.

So it seems to be the big difference is between people who saved and those who didn't, rather than sweeping differences between the types of pension plans. You are right, of course, in saying that people with a pension plan are forced into saving for retirement, whereas those who don't have one are able to choose. Sadly, many people choose not to. I would argue that a forced retiredment savings plan for all workers is a good thing to the future health of the economy - all of those people who cannot afford to sutain themselves in retirement will, in one way or another, be supported by the rest of society.

To be honest, I would personally prefer to get an RRSP match rather than have a DB pension. There are people who favour the security of DB pensions, but I prefer the autonomy of my own investments which have been doing much better than the expected pension payout despite the downturn in the economy. But many people are not interested in learning about investing, and I think for the majority of the population a forced savings plan would be a benefit. That is what the CPP is supposed to be, only it's quite meager as you point out (both in payouts and in contributions).

Regarding your last points - I am part of the 8 out of 10 that have a defined benefit pension. What I was saying is that it is not "tax-payer guaranteed" in the sense that it doesn't work the way a lot of people thing a gov't pension works. It doesn't get paid out by general funds, it comes from the funds that have been paid into the pool while the employee was working. If the managing company's investments tank and they go bankrupt, then the employee's are screwed. Of course, you are right, the government in that case will probably come bail them out, but that also happened with a number of private sector firms just a few years ago.

You're right that my anectdotes don't equate to data. There is an additional bias in that I'm in Alberta, where the private sector salaries are on average considerably higher than Canada at large. That is also why there is so little demand for public employment here (until this year, that is). I imagine in the maritimes people are probably lining up around the block for public positions. There is data for my discipline in my locale, published by APEGGA, which I backs up my anectodes though.

Anyway, my general argument wasn't completely about pension reform, but rather in the way that many people propose to do it. It's one thing to simply change it going forward and having incoming employees be aware of what they are getting. It's another thing to have employees pay into a program for years only to have their benefits cut at retirement. That's equivalent to saying "I think the RRSP match we've been giving you for the last few decades isn't fair, so we're just going to confiscate some percentage of your RRSP." Any comments on that?

[Wilbur]

Whether your savings are forced through membership in a DB pension plan, or imposed through self-discipline is irrelevant notwithstanding the former makes the task easier. The point is simply that anyone can maintain their income in retirement by diligently saving and investing throughout their working life. Most people I know who complain about DB pension plans did not meaningfully begin saving for retirement until into their forties, and as a result they now realize they will have to work into their sixties and they are jealous. Their priorities tended to be new cars and toys in their twenties and thirties. They also tend to incorrectly believe that government employee pensions are paid from tax dollars, whereas the employer's pension contribution is simply part of the employees overall compensation package. In retirement, the government doesn't give me a nickel. My pension payment comes from the investments made by the plan with my contributions. My friends without a pension who did save and invest diligently generally mock my DB plan because they did much better investing on their own, especially those who bought investment property in greater Vancouver.

It is true that government DB pensions are ultimately backed by the government if they go into a shortfall situation, but there is history to this. Governments used to manage pension funds as they saw fit, including forcing government pension plans to buy very low yield government and crown corp bonds. You'll find a lot of highways, hydro dams and such were financed with funds from government employee pension plans. The government's guarantee is virtually meaningless for most plans now days because they have moved to independent management at arms length from government, are well invested globally and earn returns that more than fund forecast liabilities. The provincial government plan I belong to has over $100B under management, has averaged an 8.4% return for the past 25 years and is in surplus.

[North Shore]

The provincial government plan I belong to has over $100B under management, has averaged an 8.4% return for the past 25 years and is in surplus.

...Until some greedy f**ker populist politician decides to 'pay the government a dividend,' and takes the surplus...