Working through some numbers

Ottawa's Job Bubble 

Statscan came out with some average wage numbers in Canada. Average wage BC. Numbers show that the average Canadian is making a little over $ 40,000 per year.

The National Post reported on the dramatic increase in employment in the federal government. Ottawa's jobs bubble. It appears that the average wage for employees in Ottawa is around $72,000.This would be consistent with a report that analyzed compensation at the feds. Total compensation—Core public service

Golden Pensions
The federal employee are entitled to a pension worth 70% of salary when fully qualified. Demands grow for civil service wages, pension reform. This means that a fully qualified average federal employee has a pension, including CPP valued at $49,000 per year. They can start pensions as early as age 55 and many will collect them for longer than they worked. Report on life expectancy is good news

Who Pays? 
 Kathryn May wrote an article suggesting that the civil sector pay for at least half of the cot of their pensions. Demands grow for civil service wages, pension reform. This seems a little more fair for taxpayers.  

What is fair? The CD Howe estimates that these pensions are worth about 34% of compensation. The employees currently only pay 8.5%. They would have to double contributions to pay 50%. PSSA RATE OF CONTRIBUTION It appears that the taxpayer subsidies are about to end.

This will generate ...

Howls of Protest
PSAC members are up in arms over media reports that no longer with their pensions be funded on the backs of taxpayers. PSAC members mobilizing to protect pensions

We are into a new era of pensions and saving for retirement. I was quoted in an article by Monica Gutshi of the Wall Street Journal in and article called Little Confidence In Pension System. 

Most Canadians do not have much faith in the system the way it works now and are counting on the government to make some real changes to make the system more fair and equitable to all. 

We will see....

Upcoming Federal Budget and MP´s Role

 

Costa Rica is a beautiful country. I was lucky to spend 2 weeks travelling in costa Rica including a stay in the shadows of Arenal an active volcano. 

The people in Costa Rica are very friendly and it is a safe country to travel. The minimum wage here is about $300 per month. They pay about the same as North America for most commodities including food, communication and gasoline.

It looks like much is happening leading up to the next federal busdget. 

There is lots of speculation about with the budget will bring. Will it contain provisions to control pension costs or will the status quo prevail?

In order to control the costs of public sector pensions, some think that change must start at the top. The Canadain Taxpayers Federation think that MP´s must re-evaluate their own pensions and then look at the public sector as a whole. Class of ´93  

MPs indeed have a juicy pension. MP Retiring Allowances Detailed Report .

This is a typical public sector pension plan, I dont know why they call it a retiring allowance? 

The tax laws for taxpayers and ordinary non public sector workers only allow for pension accumulation up to about $82,000 per year. Anything over the Federal Tax limit must be set-up in special plans such as RCA´s and SERP´s.

The MPRCA is a special public sector plan.
The purpose of the RCA is to fund a Supplemental Executive Retirement Plan (SERP) for a group of managers or executives on a defined benefit basis. The SERP provides pension benefits that exceed the maximum pension limit prescribed by tax legislation.

These plans are common in the public sector for earners over the pensionable max. Thus Catherine Swift talks about seperate rules for taxpayers and the public sector. Check you local hospital board, school board and municipality many have set-up these specials plans.

Pension boosting and spiking.
This is for the payment of pensionf or income over and above regular income. For example, the plan calls for 3% per year based on the best "sessional indemnity" for 6 years. It appears that MP´s get paid only for for base salary and not all allowances for committees and junior minister positions etc.

This 3% pension compares to the regular public sector that gets 2% per years of service and emergency services who get 2.5%.

The pensions accumulate like this: 

3% for 25 years = 75% of annual salary

2.5% for 30 years = 75%
2.0% for 35 years = 70%. 

Funding
These guys get abut $5 for every one that they put in. See the Members Contribtuions and Government contributions Table 2 contribution schedule.

Future shortfalls of course are all government (read TAXPAYER) backstopped.

Double Dipping
One good note is the double dipping feature if the MP returns to work with the Feds his allowance is suspended. Not a usual feature in public sector plans.

It will be interesting to watch the events leading up to the next federal budget. 

Regina's Pensions Back in the News

It appears they are having discussions about the city Pension in Regina. At least we can say we saw this one coming. Original post April 2009.

It would be wise for the trustees to wait until the 2009 results are released before making any decisions. All too often we see governments rushing to make recommendation before the full scope of the problems are acknowledged and then saying OOPS... it too late. Here is the direct link to the pensions most recent annual report. Regina's Civic employee's Pension Plan

The Leader Post states:
"The trustees have provided information and experts so employers — represented by the City, which consults with the other employers — and the employees — represented by a committee of delegates from the 19 groups — can examine the options.""

"Bob Linner, vice-chairman and designated spokesperson for the Board of Trustees of the Civic Pension Plan. That board is made up of 12 representatives, with six from each of employer and employee groups."

The only problem is that the ones guarding the chicken coop are the foxes. It appears that everyone who has been brought to advise on the pension in probably is getting a union negotiated, taxpayer funded gold-plated  pension.

Who is protecting the taxpayers interest? Although there was a gratuitous reference made to the taxpayers in the article I dont think it means much.

Here is  a list of the items the taxpayers should be demanding from the city.

1) Fundamental changes - The taxpayers 'pension plans are not good enough. " Fundamental changes — such as to a defined contribution plan, in which risks rest solely with employees — have not been discussed. Such a shift would be considered "worst-case scenario". "
Note: we saw earlier in the week that the Province had already converted most of the public sector to DC plans. If it is good for taxpayers and provincial workers why is it worst case for city workers?

The Trustees have these items on the table:

• Increase contribution rates (subject to Canada Revenue Agency maximum employee contributions of 9%),

• Introduce less generous inflation protection after retirement,

• Reduce future benefits; or,

• Implement a combination of these options.

2) Plan shortfall - The pension plan lost $158 Million in 2008. Dropping to $685M total assets in the plan. The plan was up in 2009 to 85% funding from 75% funding in 2008. However, the markets are off already this year and quite likely will produce very meager returns.

3) Already the plan has fallen to the point more money is coming out than going in.  There are almost as many retirees on the plans there is active workers contributing to the plan.

4) Contributions required to fund these types of pensions are about 34%. The current contributions fall short. By about 10%.
Member Contributions

5) Eliminate Pension Buy Back
You can also voluntarily increase your pension plan contribution before retirement by contacting Pensions. You may elect to:

• Purchase a period of service where you were previously a member of this Plan but received a refund of contributions upon termination. If you elect to purchase this service within 180 days of re-entering the Plan, you will receive credit for previously forfeited employer contributions.
• Purchase a period of service where you were employed by one of the employers participating in the Plan but were not a member of the Plan.
• Increase your post January 1, 1966 base salary pension factor from 1.35% to 2%.

6) Change the retirement age
Many pensions are looking at making 65 the mandatory retirement age

7) Ensure there is no Pension Spiking - Sick leave and Vacation Allowances usually are included in pension calculations. can we get FOI info on the pensions for these guys?
Retirees get big Pay Day
Pension Spiking Stinks

8) Commuted Pensions - Check the values of commuted pensions. The smart ones will be getting as much money out now as they can. Commuted Pensions
 
9) Double Dipping - Because of the early retirement provisions in the pension plan many employees trigger the pension and return to work shortly thereafter either with the city or another government organization. Many governments are taking responsible action and disallowing this type of taxpayer abuse. How Double Dipping works

Other notes:
http://www.regina.ca/AssetFactory.aspx?did=3277
http://fairpensionsforall.blogspot.com/search?q=regina
.

Getting the Message?

Yesterday the Ontario governments Committee on Finance and Economic Affairs heard expert witness from Catherine Swift. These are the pre-budget meetings to determine where Ontario needs to go in its next provincial budget. Globe and Mail report

One part of the interview focused on pensions. CFIB Presentation PDF

Mr. Michael Prue: In chart 15 your members talk about the wage differential and you talk about the pensions.
Ms. Catherine Swift: Right.
Mr. Michael Prue: Just to deal with the pensions, public employees, both federally and provincially, pay enormous amounts of their gross—
Ms. Catherine Swift: I realize that.
Mr. Michael Prue: —into the pension. You can't take that away. They've paid it, some of them, for—
Ms. Catherine Swift: We're not saying take it away. We're saying freeze it. The federal and provincial employees—the taxpayer is required to match what is put in by the employee. I don't begrudge anyone saving for their own retirement. Knock yourself out. But you will never find a private sector program that is as rich as all of these public sector programs, and right now you are beggaring the private—and it's not just Ontario; I said it's right across the country and some are worse that others.
But you will never find the richer pension than you will get in the public sector, and you retire much earlier.
We've done quite a bit of research on this. The public sector employee works fewer hours, makes more money now—it used to be the pension was a quid pro quo for lower wage levels, decades ago, but those wage levels have come up and exceeded the comparable private sector job, on average.
Any actuary you speak to—and we speak to them quite regularly—will tell you that something's got to give on the public sector pension front, because it has gotten way out of control and it's not even financially sustainable, even if you agreed that people in the public sector should get more than their private sector counterparts and should retire much earlier and so on.
The Vice-Chair (Mrs. Laura Albanese): Thirty seconds.
Mr. Michael Prue: But I don't understand what your members are expecting to happen with this—
Ms. Catherine Swift: Well, why can't things be frozen? Compensation levels could be frozen for a period of time. Private sector should be permitted to catch up. I mean, you want to help lower-income people. The best way to do it is reduce their tax burden. In the last budget—a lot of people didn't notice it; one of my actuary friends did and brought it to my attention—$2 billion was put in for the next three years, simply to cover off shortfalls in public sector pensions. And you know what? That's not even enough. So there's $6 billion in a three-year period alone to deal with this. It's milking everybody dry right now, and we're going to have a crisis in it.
Warren was referencing municipalities in the US going broke and having to increase taxes. You know the main reason they're going broke? Their public sector wage and benefit burden. 

The only comment I have is that there is a  serious misunderstanding about how much public sector employees pay into their pension plans. It is not as Prue suggests enormous amounts of their gross.

The CD Howe Institute has pointed out that true cost of these pensions in in the range of 34%.  Most public sector workers pay well under 10%. This leave the taxpayers to fund at least another 20% into these plans. The problems is most government's only match the employee funding. Thus currently these plans are underfunded to the tune of 10%.

For example, most of the members of the CFIB pay 9.9% into CPP (Canada Pension Plan) to get pensions from it of 25% of earnings.

It will be seen if the Ontario government has heard the message.

Chicago is broke!

 

Like most governments around North America, the State of Illinois is staggering under the weight of its pension obligations.

Public servants baby boomers have made extravagant pension promises to themselves. Now that these boomers are close to retiring, the taxpayer and future workers are finding out the size of the tab. It is not pretty.

A large part of the problem is the gap between what public sector employees have offered themselves and what the private sector will get. Now in Illinois the States largest business organization, Commercial Club of Chicago, has started a campaign to control the costs of these plans.

Check out the Web Site and watch for more future news from this group. Illinois is broke.com 

Lets hope we see more of these groups help to share the news.
Canadian Taxpayers Federation  
Canadian Federation of Independent Business
New Start Nova Scotia - Pensions In Crisis
Pension Tsunami
The Free Enterprise Nation

Obscene taxpayer and pension abuse in Ottawa

.
The CBC reported on an issue in Ottawa where the city auditor gave himself a very juicy pension deal courtesy of the taxpayers of Ottawa.

The auditor was leaving employment of the federal government. Unfortunately for taxpayers he had not yet qualified for his gold-plated pension with the feds. He appeared to be a few years and $100,000 short.

Some of the facts are:

• He had a verbal agreement with Kirkpatrick (city manager) that he could transfer his federal pension to Ontario’s municipal employees’ group pension plan.  
• He had the opportunity to buy back federal pension time. For an expenditure of $20,256, he was able to boost his federal transfer amount by $175,536
• Ask the corporate-services committee if it would cover the money he had paid out to enhance his pension. Because such a payment would be a taxable benefit, the city was asked to boost the amount to just under $104,000 to cover the taxes Lalonde would have to pay.
• Lalonde worked for the federal government and then the City of Gatineau before getting the Ottawa auditor's position in September 2004 
• The auditor now has full pension credits from three different employers and one taxpayer

        Auditor got $104,000 boost to city pension 
        Pension defence tarnishes auditor

The truly obscene thing about this deal is not the $ 104,000 "bonus" he took from City Hall or the $208,000 that Ottawa pays him every year; it is the fact that he transfers pension credits from one employer to the next, and keeps his full pension.

He appears to be fully qualified for his City of Ottawa pension. At his current salary of $208,000 he will receive a 70% of salary pension for life. This is worth $ 145,000 per year, paid for life and indexed to go up every year. All courtesy of the Ottawa taxpayers.

The fair-value of this pension is close to $ 2.3 Million.

This is the same deal that earlier in the year the President of the University of Calgary received.
University Faculty calls president's pension 'obscene'

Part of the tragedy of this story is that the position of auditor is one that most government organizations should better manage and implement. However, if the auditor himself has no credibility the position loses all of its potency.

Here is an example of the types of issues the auditor can address: 
Sick leave, transit strike cost Ottawa millions 
City auditor general's report

Here is what happens when he has no credibility:
Auditor has no authority to question taxpayer funded party

This is outrageous and Ottawa taxpayers should stand-up against this type of abuse. 

To whom is Canada's Debt Owed? CTF Report

A recent report from the Canadian Taxpayers Federation shows that a large portion of Canada's federal debt is owed to the civil servants. It is owed for the future promise on the pension obligations of the federal government. Canadian Taxpayers Federation

The statistics from Statscan shows that Canadians owe $137 Billion to the pensions of federal employees. This is in addition to the billions already pumped into these pension plans.At the end of 2008 the PSP already had almost $40 Billion of taxpayers money.

The amount of the deficit is actually a lot larger than the $137 Billion that Statscan reports. The CD Howe Institute shows the actual amount is closer to $200 Billion. The Startling Fair-Value Cost of Federal. Government Pensions - PDF .

The CD Howe report comes up short on the obligations for Canadians when it is considered that federal employment only accounts for 15% of total Canadian government employment. If we consider that 15% of government pensions are short almost $200 Billion. The total liability to taxpayers is in excess of $1.3 Trillion.

This is in addition to the $555 Billion that Canadians have already pumped into public sector pension plans.

In Other Notes 
The average Canadian is earning about $41,000 per year. Canada's average wage

A report from BC shows that paramedics in Ontario earn in excess of $100,000  in total compensation. Considering their base salary of $88,000 per year, pensions for these employees will be valued around
$61,600 per year. They are guaranteed for life, indexed to increase every year and go to a surviving spouse for life.
Report on Paramedic Compensation - PDF

Pension report from BC's Finance Minister

The Globe and Mail pension specialist, Janet McFarland, covered a report released from the BC government. The report shares their vision for the future of pensions in Canada.

Middle-income retirees face pinch

BC Pensions Report

This ia an excellent article on an interesting topic.

The CPP as it stands is designed to provide 25% of income up to the YMPE limit of $47,200. So any earners over the limit have topped out on CPP. This year the earnings will be $11,800.
2010 CPP contribution numbers

The BC report points out that CPP and OAS programs combined are designed to provide 40% of the YMPE income level. This is seen as a suitable income level for Canadian taxpayers to have for retirement. However, the BC Finance Minister and the rest of the MLA's in BC feel it is necessary to have a 70% replacement pension for themselves. They like to include the rest of the public sector employees at 70% as well. All with no limits or YMPE.

One rule for taxpayers and another for public servants sucking up taxpayer money.
Gold-plated Pensions for MLS'a in BC

This compares with public sector pensions that earn 70% of final salary. The income average at the federal level is $75,000. (the last salary survey was based on 2002/3 numbers, the average annual increase has been about 7% since then.) So the pensions here are at about $52,500 including CPP.
Treasury Board of Canada Treasury Board Compensation Report

Canada's average wage is at around $40,000 per year. So most Canadians are covered under the CPP plan. As the article points out there is a shortfall for the group between $30K and $100K. This group pays about 42% of disposable income into taxes. This does not leave very much to save into retirement plans.

The unions in Canada envision a program to boost CPP to 50% up to $100k. In the UK they have begun to implement this type of a program. They call it the NEST plan. All employees and employers will be required to contribute into the supplementary retirement plan.    
UK-wide pension fund to be called NEST
 
Lets move the public sector and private sector to the same plan, level the playing field so to speak and most Canadians will live comfortably in retirement

Public Sector Prepares All Out Battle with Taxpayers on Pensions

 

The public sector is preparing for battle over the issue of protecting their taxpayer funded pensions. It will not be pretty and the taxpayer does not have much chance of winning.

The war teams of the public sector unions are meeting in Ottawa to develop the battle plan. Eighteen of Canada's public sector unions are getting together as Federal civil servant unions gird for battle

It is urgent for the public sector unions to protect their pensions as Canadians begin to realize that Federal PS pensions are a $58B debt time bomb. Especially as Taxpayers are asked to cover rising pension costs for government employees as noted in this Business Week article. This article has US references but still relevant for Canada, I put this in here as Leo from Pension Pulse is quoted.

In Ottawa the current government is afraid of the fight and has been trying to avoid it at all costs. In an attempt to diffuse the issue they claimed that retirement security was not a problem for Canadians. Don't panic on pensions.

Despite federal government denials of pensions being a problem in Canada, public sector unions can see trouble brewing. CUPE Video on Issue

You can get a preview of the fighters who will be in the ring making this similar to a last man standing WWF fighting match. Heading Towards a Pension Summit. Indeed there are billions of dollars of your money at stake!!!

The unions had a get together in the fall of 2009. Here is a series of videos that offers a preview of issues that they will be bringing forth.  

Pension Video Series 

Ontario Teacher Federation  

Canadian Labour Congress  

CLC, pension crisis - Part 1

CLC, pension crisis - Part II

Public pensions part of the problem

One of the leaders in the discussion on pensions in Canada is Catherine Swift. She is president and CEO, Canadian Federation of Independent Business (CFIB).
 
Today her letter to the editor was printed in the National Post. She is right on the money when she says Public Pensions Part of the Problem

 Ontario NDP Leader Andrea Horwath’s claim that pension plans like OMERS, the Ontario Teacher’s Pension Plan and HOOPP work well once again promotes the incorrect notion that if only we could have such wonderful types of plans to offer other Canadians all our problems would be solved. She neglects to mention that there is one and only one reason these plans work — because they are endlessly supported by massive and growing amounts of private sector taxpayer dollars. 

These are dollars that those private sector taxpayers do not have to put away for their own retirement. Public sector plans like OMERS and the OTPP are part of the problem, not part of the solution. These plans are invested in exactly the same stock and bond markets as are RRSPs and other plans.

For example, the OTPP lost 23% in the recent market meltdown — pretty much the same as what everyone else lost.  Yet did benefits get affected one iota? Of course not, as generous taxpayers are expected to pick up the slack like they always have.

There are indeed serious problems facing private sector retirees that need to be addressed, and one of the first steps must be cutting back on the private sector dollars going to rich public sector plans, and increasing public sector retirement ages (currently much younger than anyone else in the economy) so that private sector taxpayers are left with a few bucks to put away for their own modest retirements. There is no financial or social justification for our two-tiered, reverse-Robin Hood pension system.

The facts that she presents here were backed up in a report produced by the CFIB called the Pension Predicament  This report was on the first to recognize that the gap between public sector pensions and taxpayers retirement plans is unfair, unjustified and unsustainable. 

Retirement crisis overblown???

An interesting article today from one of Canada's foremost pension expert was released in Advisor.ca

The article cited that

Despite dire warnings in the press that Canada's pension plans are set to implode, one of the country's most respected actuaries says the problem isn't really that bad. In fact, Canadians are in an enviable position compared to most other countries.

When we see the news today  about the earthquake in Haiti we realize how truly blessed we are to live in a country like Canada. It is true that

"We have virtually no poverty among senior citizens in Canada — virtually none; a big change from 40 years ago when we started to develop the (retirement) system that we now have."

The contention of this blog is that all Canadians need to share fairly in our countries wealth. There should not be a divide between the haves and the haves nots. Especially when the haves are funded at the expense of the have nots.

Statscan showed that in 2008 Canadians contributed a total of $ 34.1 billion into their Registered Retirement Savings Plans (RRSP). These are the plans that cover those workers who do not participate in work sponsored pension plans. There are a total of around 18.4 million workers in Canada and only 5.9 million belong to pension plans. These RRSP contributions include those of the 68% of workers not in a pension plan, or about 12.5 million workers. Nationally, the median RRSP contribution was $2,780.

These RRSP contributions contrast with those contributions made into Canada's pension funds. Statscan estimates these pension contributions to be about  $ 37.2 Billion in 2009. This is for the other 5.9 million Canadian workers who are in a pensions plan. Of these workers almost half are public sector employees. This makes for an average contribution of $ 6271.

A significant portion of contributions were funded by taxpayers for the benefit of a public sector on defined benefit pension.

In the Eye of the Pension Storm

The eye of the pension storm is focused in Southern California.

ABC News came out with this report on Pension Friction in Contra Coast County. Contra Coast is a bedroom community in the San Francisco - Oakland area. Although the report focused on an issue called "spiking"" it is really just the tip of a much larger fight that has been brewing for some time and threatens to become much larger.

Last summer we saw the Toronto strike focus on an issue of accrued sick time. The vacation time issue in this news report is based on the the same concept, a lump sum payout at retirement. Because public sector pensions are based on final salary, these terminal payments go towards the calculation of the worker's pension. The result is known as pension spiking or boosting.  

The issue of spiking is really just the current bulls eye on a fight over public sector pensions.

In the report we see Marcia Fritz interviewed. She is the President of the taxpayers advocate group called California Pension Reform. They are demanding the reform of public sector pensions in California.

One of the accomplishments of California Pension Reform has been to bring to light a serious issue that has been hidden and undisclosed to taxpayers for a long time. They have been responsible for the push in California to disclose $100,000 pensions in the public sector. Their work has been aided by the Pension Tsunami.

Pensions are an issue that will steamroll over every level of government in North America. Public pensions are the same in design and cost for workers from the City of Toronto, to California State to federal workers in Ottawa. They are surprisingly consistent across cites, states and provinces.

Unfortunately too many politicians and taxpayers are unaware of the looming disaster. Arnold Schwarzenegger calls them a locomotive.

"We are about to get run over by a locomotive and we can see the lights coming at us. We can see the lights coming"

Pension reform is an issue that is very controversial. These entitlements will be  furiously by the public sector unions regardless of the costs to taxpayers.

Conversations Between Bankers and Taxpayers

Stephen Gray wrote about the the feudal system the gap between the corporate elites and taxpayers. He captured a conversation between a banker and a taxpayer. It covers the essence of the problem very well.

The Writings of Stephen J. Gray - Blog

Earlier this year the Globe and Mail quoted me:

He calls it our "Modern Feudal System."
A system where a few have a lot and the majority have - or will have - very little indeed." -

Church and King have been replaced by Government and Big Business," says the Hamilton-based pension specialist with WB Benefit Solutions. "In the feudal age, the church and nobility always wrestled for the purse of those trapped in the caste system. But the poor serf still paid with everything he grew or could make.

 The Globe article went on to talk about the gap between public pensions and private pensions. Stephen covers the other side.

 

Average RRSP Holdings of Canadians

Statscan produced a report called the Wealth of Canadians (PDF). The report shows the level of preparedness of Canadians for retirement. It is based on the amount of retirement savings Canadians have put aside for their golden years.

This is a list of confusing facts and figures compiled on retirement savings in Canada. Feel free to analyze and create a create a comprehensive report of what all these numbers mean. The bottom line is Canadians have manged to save about $37,000 into their personal retirement accounts while contributing into and creating public sector employee plans worth and average of $163,000 per employee.

It appears that Canadian taxpayers are in deep doo-doo.  


RRSP Average Holdings for Canadians( for the 58% of Canadians who have them)
Age 35 - $22,500
Age 35-45 - $49,100
Age 45-54 - $ 90,300
Age 55-64 - $124,500
Age 65 and Older - $ 108,200

All age average of employer funded pension assets - $ 160,000


Based on the Average Wages of Canadians it appears most Canadians are woefully prepare for retirement. The average working wage in Canada is slightly over $40,000 per year.

Total value of employer pension plans $826.5 billion, loss of $128 Billion from a year previous.
Total value of public sector pension funds $ 555 Billion

Annual contributions into pension plans in Canada $ 38.8 Billion
Considering that public sector pensions hold 67% of all pension funds, if the contributions levels are the same Canadian taxpayers funded about $25Billion into public sector pension funds last year.

Public sector pensions make up over 65% all employer-sponsored pension assets. 
Public sector workers make up 20% of the workforce

Total value of Canada's infrastructure - $286.2 billion
Including highways and roads, bridges and overpasses, water supply systems, wastewater treatment facilities and sanitary and storm sewers
Taxpayers have funded a total of $ 269 Billion more into public sector employee pension plans than they have contributed into Canada's infrastructure

Average annual contribution into public sector pension plans $ 7,269 per employee. Based on estimated annual contributions of $ 25 Billion for 3.4 million public sector employees.  
Average Canadian contribution into RRSP's - $2,650

Assets in public sector pension plans in 1990 - $111 Billion
Assets in public sector pension plans in 2008 - $555.7 billion
Growth in assets in public sector plans - 500%
Percentage of workforce - 20%
Average per worker $163,000

Assets in individual registered savings plans in 1990 - $157 billion 
Assets in individual registered savings plans in 2008 - $631 billion
Growth in assets - 400%
Percentage of workforce 80%
Average per worker $ 37,000

I hope my analysis of these numbers is accurate. Please let me know if you see anything out of place.

Globe and Mail creates a splash

There is an article on the front page of the Globe and Mail today called Ottawa targets public service pension plan for cutbacks.

Some of the highlights of the article include: 

The generous pension plan enjoyed by federal civil servants is being targeted for possible cuts, including an end to early-retirement provisions for new hires.

... senior civil servants are also concerned that too many bureaucrats retire in their mid-50s, causing staff shortages that are set to worsen in coming years.

One of the most controversial aspects of the federal pension plan is the ability to retire with a full pension at age 55, after 30 years of service.

According to the Treasury Board, however, federal employees paid $1.2-billion into the plan in 2007-08, compared to the government's $2.6-billion share. That 32-per-cent employee contribution will go up, but only to 40 per cent by 2013.

This report is a mixture of interesting statistics and policy  recommendations about public sector pension plans. The information is gathered from the pension site of the Treasury Board. It is supplemented with information from a review done on wages in the Federal government. Although the information is not current, based on past trends the current salary base in the federal public sector is around $65,000 per year and the total compensation is close to $89,400. The average annual compensation for members in the RCMP service is estimated over $100,000 per year. Treasury Board Salary Review.


Retirement Tsunami

Canada has been aware of the demographic shocks coming from the retirement of the Baby Boomers. The PSI produced a report in 2005 called The Retirement Tsunami. In the report they stated that starting in 2007 more workers will be retiring than entering into the workplace. In 2010 they estimated that 370,000 workers will be riding off into retirement.

These numbers call into question the current retirement ages in Canada and specifically the retirement of the public sector with a much lower retirement age. The CFIB back these findings with a report called the Pension Predicament.

Fair Pensions For All

The Globe and Mail highlighted the contribution levels of taxpayers into the public sector retirement plans.

One of the key questions about the contributions is ... what is fair to all Canadians? Canadians have contributed $631 Billion into individual registered plans but $555 Billion into public sector employee plans.
NUPGE comments on Pension Assets in Canada

Canadians have access to the CPP but suffer reduced coverage by triggering their pensions early. If this is fair for taxpayers why should the public sector not play by the same rules?  Is it wise to take early CPP?

Recommendations for Fair Pensions 

1. Public sector employees should play by they same rules as all Canadians. Basic retirement is age 65. If pensions are taken early they should be reduced to the same level as taxpayers. Ie. 30% reduction for pensions at age 60 or .5% per month before age 65. (Thanks to L Rob)
   
2. Cap public sector pensions at a fair level. In the US two current electoral candidates have suggested that pensions in the public sector should be capped at $100,000 per year. 
3. Make all public sector pensions defined contribution plans. There is no reason taxpayers should be expected to fund into gold-plated defined benefit pensions when most will never have pensions near these levels. 

Action Required by All Canadians 
The Montreal Gazette recently featured a three part pension series. The last article called for all Canadians to become involved in the debate. They pointed out that Pension  Woes Wont Be Easy 'To Fix

But this is not just an issue for actuaries and civil servants. All Canadians - not just those between 60 and 65 - would help themselves by taking part in a full national discussion. The retirement you save may be your own.

All Canadians need to educated and become involved in the discussion about the future of pensions in Canada.

Disappointing Showing in Whitehorse

Many taxpayers are asking are asking "will I have enough for retirement".

In a very surprising move by the Canadian federal government came out with a report from Jack Mintz saying that there is No pension crisis. The Report on Retirement Income Adequacy looked at some of the issues surrounding retirement income security for Canadians. In the report Mintz highlighted that Canadian seniors do not suffer from poverty. Most Canadians retire with a replacement income of close to 90%. 

I contend that there is in fact a retirement crisis in Canada. It is based on taxpayers of the baby boomer generation funding platinum pensions for the public sector. The CFIB came out with a release that is calling for restored Fairness for all Canadians on pension inequity

It is unconscionable that Canadian taxpayers are on the hook for public sector pension plans when half of the Canadians working in the private sector will not even benefit from any form of retirement savings.

This call came at the same time as the CD Howe released a report that shows how large the liabilities of Canada's public sector pensions really are. The Startling Cost of Federal Government Pensions 

Enhanced Public Information
One of the complaints from the CFIB was the lack of disclosure or information about Canada's public sector pensions plans. A side benefit of the Whitehorse conference is that leading up to this meeting more information has become available about the costs of these pensions.

One of my readers, Stephen brought to my attention a Statscan release showing the value of pensions in Canada.$1.8 trillion in pension assets in Canada at the end of 2008.

This $1.8 Trillion is composed of: 

• Pension plans - $ 1,064 Billion
• Individual savings plans including RRSP's - $631 Billion
• Social Security including CPP - $140 Billion 
  

A further analyze shows that of the pension plan assets $555.7 Billion is held by public sector pension plans.Canadians taxpayers have funded far more into public sector employees pensions than they have their own plans.

The last Statscan workforce survey shows there are 16.873 million working and self-employed Canadians. There are 2.8 million public sector employees in pensions plans in Canada. This means that 17% of Canada's workforce are public sector employees with pension plans. However, they control 33% of the total retirement assets in Canada.

On an average basis each working public sector employee has retirement assets worth $198,464. On the other hand the average Canadian, including those in pension plans have retirement assets worth $81,000. Those not in in pension plans have an average RRSP account of $65,000.

Retirement Income
Statscan reports that there is a big gap in retirement income between those with pension plans and those without.

At the other end of the spectrum are seniors with employer pensions exceeding their combined C/QPP and OAS/GIS. Just one in five 69 year-olds fit this definition, and their average income was more than double that of the other 80%—$43,000 compared with $20,200

Of course what this means is that retirement will be an unfulfilled fantasy for many Canadians.

Another strategy for those who have not saved enough for a comfortable retirement is to continue working past age 65. ..Overall, just one in eight 69 year-olds relied on employment or self-employment earnings for at least a fifth of their income, and only one in twenty-five earned enough to account for more than 60% of total income (Table 6). And the income profile of these older workers suggests that many are self-employed professionals who likely do not have substantial employer pensions. 

The highlight of the report is that:
It appears that over the past 20 years taxpayers without pension plans have contributed an average of $65,000 into their retirement plans. At the same time they have contributed into public sector pension plans so that the average public sector worker has close to $200,000.

The CD Howe shows that taxpayers are on track for another additional $500 Billion of funding into public sector pension plans.   

I respectfully disagree with Jack Mintz that there is indeed a pension crisis in Canada. Please listen to the CFIB:

The inequality issue many Canadians are faced with regarding pensions is a serious disservice to the private sector because it is imposing needless barriers for the private sector to compete on a level playing field with the public sector. This is particularly harmful for small- and medium-size firms, which are the backbone of the Canadian economy. 

Some additional facts and figures:
Pension Satellite Account
Pension Plan Contributions in Canada
Pension Coverage in Canada 

Whitehorse Pension Debate

The debate in Whitehorse has centered on a fair retirement strategy for all Canadians. 

The problem with a debate on pensions is that most taxpayers will never have a pension. Any move to bolster pensions will only pour more money into plans that only benefit Canada's pension elites.

These pension elites works mainly for government. This includes all levels of government municipal, government and federal. Most will receive a pension based on 70% of their final earnings. They will receive these pensions as early as age 50. These pensions will be paid out at a level higher than their earnings for most of their career. 

Best of all these pensions are guaranteed by taxpayers, most of who have no pensions.

An excellent report in the Toronto Star highlights the problems with Canada's federal pensions. These pensions cover 1.08 million workers. There are other levels of government that offer these same defined benefit pensions. They cover another 2.3 million workers. The pensions of other levels of government are as generous as those of federal employees. However, they are even more poorly funded than the federal pensions. 

These pension shortfalls exist despite Canadian taxpayers having funneled billions and billions of dollars into these plans. How big is the liability to taxpayers for all levels of government pensions? 

Pension risks by James Daw

Ottawa owes about $198 billion more in pension promises to current and former employees than it has set aside, a paper from the C.D. Howe Institute estimates.
President William Robson and Alexandre Laurin argue the fair value of pension promises is about $58 billion higher than Ottawa has reported.
There are about 1.08 million active and retired civil servants, RCMP, Canadian Forces, Members of Parliament and judges.
Most will collect pensions longer than they worked. If public servants' benefits were calculated the way Robson and Laurin suggest, Ottawa and employees would have to set aside 34 per cent of pay.
But the government did not start setting aside any money until 2000. Until then, it treated the pension promises as debt.
That debt obligation, the authors argue, should be calculated using the investment return paid by inflation-protected, government-backed bonds, not estimated returns from a mix of investments.
"Federal pensions as currently configured are more costly than commonly understood and expose taxpayers, and potentially participants as well, to underappreciated risks," the authors argue. "Reducing or offsetting these costs and reducing these risks should be key elements of a program to restore federal finances to a sustainable position."
James Daw, Toronto Star - Younger workers face retirement shortfall

Start Pensions changes at the Top

In the UK there is a review of MP pensions being implemented. Report on cutting MPs' final salary pension scheme due

This is a good place to begin the redesign of our pension system in Canada. It is hard to get stakeholders to make changes that impact them on a personal level. High MP pensions lead to low voter confidence

In BC  the cost of pensions for MLA's hit the news. In an abusive move the MLA's gave themselves retroactive pensions. Pension that pay them on a defined benefit retroactively to 1996. The costs of these gold-plated pensions is an issue that calls into question the real leadership that BC is offering at the Whitehorse pension summit. $800,000 per Lucky MLA

The BBC report cited that costs for these types of pension is in excess of 31.6% of salary. Most of the public sector pensions in Canad have the same types of high costs associated with them. This is why so many are underwater and suffer from serious underfunding, amounting to Billions. This tab of course is picked up by taxpayers.

Part of any discussion reform in Canada needs to be the reforming of gold-plated public sector pensions. All Canadians should have access to Fair Pensions, not just the pension elite.

Heading Towards Whitehorse and a National Pension Summit

After many pension crisis and a horrible year in the worlds stock markets the debate on pensions is reaching a critical boil. The Finance Ministers in Canada are meeting on December 17 in Whitehorse for an event called the pension summit. The summit in Whitehorse will also help all policy stakeholders in Canada to solidify their positions on pensions. 

The World Bank released a report yesterday called Pensions in Crisis

Despite the severity of the crisis, it pales in comparison to the demographic crisis which the region will face and ...

even the most severe scenario of the financial crisis pales in comparison with the effects of the demographic crisis that is looming

It went on to urge:

Countries in the region not to make any policy changes focused on addressing short-term fiscal concerns that make the long-term even worse.

Future pension system deficits can be threefold than what is currently expected, and are expected to remain at that level for more than 20 years before slightly improving. Policymakers need to use the opportunity of the current crisis to address long-term issues, which could bankrupt pension systems precisely when the numbers of people who need them are growing.”

Although the report focused on parts of Europe and Asia it is applicable here in Canada as well. The changing demographic forces are perhaps even stronger and more severe in Canada. I attempted to highlight this risk in my blog called Tales from the other side of the aging catastrophe

National Summit
Most commentators on the issue feel that now is the time to clarify the future of pensions in Canada. There are many different viewpoints and stakeholders.Here are the numbers from Statscan. Registered Pension Plans in Canada

Seniors
Those currently in retirement and living on government and private sector programs have a large stake in maintaining what they have. They are represented by CARP. CARP envisions lots of pensions for everyone. They released their position in Towards a Universal Pension Plan 

Organized Labour 
Canada's labour movement has perhaps the greatest to lose as a result of any reform in this area. The unions represent mainly those employees in the public sector or at large Canadian companies. In Canada these are the only workers with gold-plated pensions. It is best summarized in a report from the CFIB called The Pension Predicament 

Independent Business 
Independent businesses are dearly affected by the pension crisis in Canada. It is here that the 11 Million Canadian without pension work. They are struggling to save for some sort of decent retirement for themselves. Theirs is  also the burden of trying to finance with tax dollars the gold-plated pensions of the pension elite. The CFIB has monitored this issue and has been a strong advocate for independent business. It is my hope that they can find a way of generating a forum for this voice to be heard. 

Pension Elites
These are Canada's public sector workers who protected by unions have gained the lions share of pensions in Canada. They pay a small contribution towards the pensions they will receive. They will retire early and be guaranteed a taxpayer funded lifetime of pension income. 
At the top of this heap are the senior mandarins of government. These are the ones who ruthlessly abuse the taxpayer for pension security. In Ontario there are over 53,000 government employees earning over $100,000 per year. This level of income guarantees them a $1 million lifetime pension.  
To see how these pension work go to the BC Pension Videos series website. These videos have provided me with lots of entertainment. The Value of your pension - Series

CD Howe 
The CD Howe Institute has been instrumental in leading a very intelligent and well balanced analysis of the pension issue in Canada. They have brought Keith Ambachtsheer the help produce a policy position currently leading the way in the pensions discussion. It is based on a Supplementary Pension (PDF) approach.

Pension Industry in Canada 
The life insurance companies and the banks in Canad provide most of the private pension coverage. It is their business and any reforms or changes to the system will put their financial position in jeopardy. They are in a delicate position and need to regain some credibility in the pension issue.  Canadians pay the highest cost in the world for the services of its banks an insurance companies. James Daw one of the foremost pension commentators in the country covers this perspective in Bankers' group wants to continue to protect you. Daw has covered the pension well. See all his articles at the Star 

Provincial Governments
At the table in the Whitehorse will be the provincial finance ministers. They have been muddling around for the past year with several expert commissions on pensions. The report from Ontario only focused on supporting the gold-plated pensions of government employees. However, the BC and Alberta commissions created the Supplementary Pension idea that is now going forward as the most popular way of reforming the Canadian pension system.
Here are the links to the Expert Commission Reports
Ontario Pension Review
Alberta and BC Getting Our Acts Together - PDF  

Canadian Media 
A very influential commentary on the pension crisis in Canada was put together by the Globe and Mail. They covered most aspects of pensions in Canada in the Retirement Lost series. I have enjoyed following the pension world through the eyes of my friend at the Pension Pulse, Leo Kolivakis.

Federal Government
To date the federal government has been quiet on the issue of pension reform. Throughout the year they have implemented a few emergency pension move but nothing major. Whitehorse will be a chance to see what is behind the curtain. The Jack Mintz Report will be released at the Finance Ministers meeting.

Candidate for Governor - Charlie Baker

Charlie Baker is running for Governor in Massachusetts. He has identified that pension reform is one of the key issues that resonates with voters.

Pension Caps
Baker said today he wants to cap all pensions at $90,000.
In Ontario we have seen the are over 53,000 public sector workers earning over $100,000 a year. Those earning over $130,000 will get pensions in excess of $100,000 per year.  This is still a pension worth $1.6 Million.

Pension spiking 
He wants to prevent workers from temporarily jumping into more lucrative jobs and collecting a boosted pension based on the increased salaries. This can happen because in the public sector pensions are based on a final 3 or 5 year average salary. The standard in the private sector is for a pension based on a career average.


Career Average Pensions 
He proposes calculating a pension over a worker’s career, rather than the top three salary years.Most government pensions are based on the final 3 or 5 years of salary.

Of course Charlie will have a tough go from the largest voting block, public servants. However, he is popular with taxpaying voters and is getting Record Amounts of Contributions for his campaign.