Canadian Union of Public Employees (CUPE)

Canadian Union of Public Employees (CUPE)

September 16, 2013 16:09 ET

Attacking defined benefit pensions no solution to crisis

OTTAWA, ONTARIO--(Marketwired - Sept. 16, 2013) - Abandoning defined benefit pension plans is short-sighted and irresponsible, and will do nothing to help Canadians prepare for retirement. The Canadian Union of Public Employees says faulty claims that defined benefit pensions are 'unaffordable' - like those made in a recent report from the Fraser Institute - are just a distraction from the real pension crisis.

"Over 11 million Canadians don't have a workplace pension plan. More than 75 per cent of Canadians are not contributing to RRSP's that are not even an effective way to prepare for retirement anyway," says Paul Moist, national president of CUPE. "This is the real crisis we need to address, instead of wasting our time with attacks on a part of our pension system that works - defined benefit pension plans."

A recent report from the Fraser Institute claims defined benefit pension plans for provincial public sector workers have required 'bail outs' by taxpayers. The Fraser Institute analysis, however, is flawed. The period examined, starting in 2000, was a period of low interest rates bookended with the global economic crisis - leaving defined benefit pension plans with temporary and surmountable funding challenges.

What the Fraser Institute conveniently ignores are the periods before 2000, when employers - including provincial governments - benefited greatly from defined benefit pension plan surpluses. Particularly during the 1990's, employers were able to reduce, and even eliminate, their contributions to defined benefit pension plans.

"Employers who benefited from surpluses and contribution holidays cannot simply walk away from their responsibilities during the difficult times," says Moist. "While there is ground to be made up, defined benefit plans are recovering. For any employer - including governments - to use temporary funding challenges as an excuse to abandon defined benefit plans is short-sighted and irresponsible."

Efficient and secure defined benefit pension plans are an essential part of Canada's pension system. Replacing them with inferior alternatives - such as defined contribution plans - will drive down pension benefits. This will mean more seniors living in poverty, and more strain on government assistance programs for low-income seniors.

"Defined benefit pensions are not a frivolous perk - they are fairly earned deferred income. And these plans are not solely funded by employers. Workers make significant contributions to their plans throughout their careers, saving for their own retirement," says Moist. "Portraying defined benefit plans, including those for public sector workers, as excessive or 'gold-plated' ignores the value they have for workers and the overall Canadian economy."

CUPE is calling on provincial governments to ignore distractions like the Fraser Institute study, and renew focus on real measures that can help Canadians retire in dignity with a decent income - such as expanding Canada Pension Plan benefits. Through gradual increases to worker and employer contributions, CPP benefits could be doubled. This plan benefits virtually all Canadian workers: private sector, public sector, union and non-union.

"Provincial governments need to get past the red herrings that only aim to drag down pensions," says Moist. "We must concentrate brining retirement income security to those who need it most - the 11 million Canadians without a work place pension plan."

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