Sunday, May 9, 2010

Pension Apartheid

There was a recent election in the UK. One of the key election issues has been Pension Apartheid.

The Daily Mail in the UK reported that Pension Apartheid is:
The huge bill taxpayers face to pay for the pensions of the country's 5.8 million public sector workers. ...This means that public sector workers can retire relatively young on generous sums whereas private sector workers have to retire later and get less money.
 Canada is suffering Pension Apartheid as well.

Unfortunately in Canada no one has been able to put together the annual cost of public sector pensions. It must be staggering as cities, provinces, universities, hospitals and school boards all funnel tax dollars into the pension plans of public sector employees.

Statscan Pension Satellite Account
In a report from Statscan in 2007, the size of Canada's Pension Apartheid was reported. Canada's Pension Apartheid 

This is one of the graphs from this report. We can see that Canadians have funded billions of dollars into public sector plans at the expense of their own defined contribution plans or RRSP's. In fact, two of the bars in the chart show the public sector plans. 

The bar called Government Consolidated Revenue Arrangements is the pensions for high income earning public sector employees. Like the one recently uncovered for the retiring 47 year old Police Chief of Montreal. He is entitled to a $135,000 a year pension, a pension with a cash value of around $2.2 million. 

The Government Consolidated Revenue Arrangements are a form of taxpayer abuse. They have special rules which the public sector have created for taxpayer funded pensions, for themselves. Read the note on the table
These supplementary employee retirement plans were set up to provide pension benefits to (public sector) senior employees beyond the maximum permitted registered pension plan benefits as set out in the Income Tax Act.
 Total Contributions 
 The total value of pension assets in Canada, are covered in a confusing table produced by Statscan. Pension assets by type. 

There are about 3.6 million public sector employees. With $805 Billion public sector workers have an average of around $230,000. In the private sector there are about 13 million workers. They had a total of $1 Trillion in pensions and RRSP's. This means an average of $80,000 in retirement savings for private sector workers. 

For every 1 dollars that taxpayers have been able to save in their retirement pots they have funded the accumulation of 3 into public sector pensions. Several reports over the past month have shown us that many hundreds of billions more are required to bring public sector pensions up to full funding. 

Who is going to take the initiative to end this Pension Apartheid?

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