Sunday, 18 October 2009

Pension underfunding

 News headlines remain fearful. I do not hesitate to say more fearmongering.
A recent Globe & Mail headline:  Canada's retirement dreams are under siege, weakened by underfunding and hobbled by the global recession. It's a national crisis with no easy answers.

I say that with employment rates rising in Canada, we are on our way back to recovery.  The recession is not to blame for automotive industry failures. Bad investments, or the global markets downturn, are a small factor compared to underfunding of pensions over the long-term. The markets are improving slowly, but steadily.


Yes, 60% of Canadians do not have private pension plans, but these are not the people on which the story focuses. It focuses on these formerly tidily employed individuals; a Nortel manager,  a steel worker ($70,000 / year for building cars, plus huge medical benefits), and other private sector workers whose private pensions are underfunded. I am not sure for whom the Globe is lobbying, but these nicely pensioned workers may have to sell their homes and move to smaller ones and eschew travel for staying home.
This article points out, in part,
  • 84% of public service workers have pensions.
  • 78% of these plans are gold plated defined benefit pensions
  • 25% of private sector workers have a pension plan
  • 16% of these plans are gold plated defined benefit pensions
  • 11 million workers, or 60 per cent, of Canada’s workers have no pension at all
  • 8 million or 45 per cent, have no pensions or registered retirement savings plans (RRSPs) 
I do not feel badly for the men highlighted in the article. It is the part-time worker (primarily women), our hourly waged employees, who will have to rely on Canada Pension for their retirement years. Underfunded pensions should not be taxpayer problems. Big business made mistakes (Nortel, Air Canada, the automotive industry), but how can the rest of us be called to carry the burden of corporations filing in bankruptcy court?

We cut back immeasurably in order to retire. My pension is small, having retired early from teaching. We live simple lives, in a smaller home. We pay big bucks for group health care. We realize we may have to find part time work at some point. We may have to move to an even smaller home. But that is reality. I find these retired folks sitting on their pension laurels wearisome.

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