Tuesday, December 14, 2010

Fair contributions for existing employees.

 Cartoon from the terrific editorial cartoon staff at the St John Telegraph-Journal

Currently the federal public sector contributes 8.4% into a plan that is worth about 34% of salary. The taxpayer is left picking up 25.6% of the existing plans. Changes be made to the existing plans to make them more fair?  
PSP Pension profile  Average pension paid - $24,506
PSP Pension rates
PSP Pension financials  Average new pension paid - $39,312
Average Canadian CPP pension - $6,000

Since any major changes in pension plan design for the public sector will be made for future employees, there are millions of public sector employees under the current pension regime.
As serious effort needs to evaluate what is a fair contribution by employees towards these plans.

The CD Howe estimates that currently these plans cost 34% of salary. The current contributions by employees fall far short. It is possible that the CD Howe estimate is too generous.

The head of the federal public sector pension board recently commented
As I observed in the 2010 Annual Report, the first 10 years of PSP Investments were challenging times. According to the Wall Street Journal, the first decade of the 21st century turned out to be the worst ever for US stocks based on records going back to the 1830s. Total returns for the period 2000-2009 amounted to negative 0.5%. That compared with a high of 18% in the 1950s and was even lower than the negative 0.2% return for the 1930s Depression era.
Courtesy: The Pension Pulse  PSP Investments' second Annual Public Meeting

Taxpayers holding the bag 
Holding the bag: It actually dates back to the middle of the eighteenth century in Britain. The original version was to give somebody the bag to hold, meaning to keep somebody occupied or distracted while you slipped away. Figuratively, it meant to leave somebody in the lurch, to let them stay around to take the blame for something that had gone wrong.

This is what taxpayers are left with, holding the bag. 

Bill Tufts 
Fair Pensions For All 

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