Thursday, July 22, 2010

Working Seniors and Canada's Pension Apartheid

There is an excellent article on Canada's working seniors in today's Montreal Gazette

There are some excellent insights into this issue and as the article points out there are some important questions still to be asked.

The break point on the analysis of $49,000 is interesting. This is a group a little higher than the average Canadian wage; a little over $40,000. So there are Canadians retiring with good retirement incomes greater than those still working. 

This $49,000 puts these retirees into the level of pensions in the public sector. For example, the average federal worker earns about $72,000 annually. Fully qualified for a 70% pension they will earn the $49,000 a year pension sited here.

Pension Apartheid
The Brits have coined a phrase called pension apartheid. It is the gap between those retirees in the private sector and those who retire on public sector pensions, such as teachers, government workers, and police.

UK Pension apartheid

This gap exists in Canada as we see fewer and fewer Canadians able to contribute to decent pensions yet the public sector retires as early as 50 (police and firefighters ) and 55 (regular retirement).

Even the public sector unions who benefits from gold-plated pensions recognize the problem.
Are McJobs Part of Canada's Retirement System? 
The unions tell us the average pension is only $17,000 but they neglect to mention that the this includes pensioners who have been collecting for more than 30 years.

What is new pension today worth? Probably in excess of $40,000 and the workers are entitled to CPP on top.

Private Sector Poverty This gap means that many more Canadians will work in retirement not for fun but for necessity. Unfortunately it is the same in many developed countries.

US -
Retirement will be risky for many Americans, says Employee Benefit Research Institute
UK -Millions face retirement in poverty as pension savers decline during recession

Statscan tells us that 18 million workers are in Canada's labour force. Yet only a small portion of these workers have been able to contribute to their personal retirement savings.

In 2008 only 6.2 million workers contributed to their RRSP plans. This is only one third of working Canadians. To be fair in addition, 20% are public employees and have gold-plated plans. Due to the recession these numbers I suggest are falling.

RRSP contributions fell in 2008

Public Sector Prosperity

At the same time as the recession has put many workers into a precarious situation for retirement the public sector has seen their plans flourish and in fact prosper during these times.

Statscan shows the dramatic rise of public sector pensions over the past 20 years. See Chart 4 -
Pension assets in employer-sponsored plans by type

Another alarming Stastcan table shows the gap between the public sector plans and private plans. The public sector pensions combined with Government consolidated revenue arrangements show the public sector has about $800 Billion in its pension kitty. The private sector has about the same. However, only about 25% of workers are in the public sector yet they get the lions share?

Statscan - Pension assets by type.

Unequal shares
In 2008 all working Canadians contributed about $34 Billion into their RRSP's. At the same time the taxpayer helped public sector employees funnel about the same or $30 Billion into public sector pension plans. But there are only about 3.5 million public sector employees.
These contribution numbers are available at the Statscan - Pension Satellite Accounts

There is a total workforce of 18 million. So 3.5 million public sector employees were able to contribute the same amount into retirement pots as all working taxpayers. Of course, a bit part of that contribution came from taxpayers.

Golf for Life at 55 Club

As a result the public sector has pensions based on 70% of their retirement income. They are eligible to retire as early as age 50 and if they choose they can collect their pensions plus go back to work and collect a salary as well.

The ones that do not go back to work become part of the
Golf for Life at Age 55 Club.
Most of the Golf for Life at 55 Club will have pensions starting at $40, $50 and $60 thousand dollars per year! All fully guaranteed. Guaranteed for life, guaranteed to increase every year, guaranteed to a surviving spouse and best of all guarantee
d by Canadian Taxpayers. 
Bill Tufts 
Fair Pensions For All

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