This is an archive of news stories and research from the National Union of Public and General Employees. Please see our new site - https://nupge.ca - for the most current information.
“All these changes are positive. But not one of them addresses the current and most significant problems we’re facing – the lack of pension protection and retirement security for Canadians” Larry Brown, NUPGE National Secretary-Treasurer
Ottawa (30 October 2009) – The series of reforms for federally-regulated pensions announced by federal Finance Minister Jim Flaherty earlier this week were a “disappointment and will do little to provide pension security to Canadians”, according to Larry Brown, National Secretary-Treasurer of the National Union of Public and General Employees (NUPGE).
The most significant change is to raise the threshold at which plan sponsors can have surpluses in their pension plans, from 10 percent to 25 percent of the fund's assets.
Another change will require employers to fully fund pension benefits when a plan is terminated. At present, employers are required to fund only 80 percent of benefits. Employers will also be prohibited from taking a contribution holiday unless they accumulate a five percent surplus in the plan. The method for solvency funding methodology will also change to make it less volatile by basing the funding requirements on a three-year average.
The changes will mostly affect federally regulated pension plans, which make up only seven percent of all pension plans outstanding and involve sectors such as telecommunications, airlines and railways.
“All these changes are positive,” notes Brown. “But not one of them addresses the current and most significant problems we’re facing – the lack of pension protection and retirement security for Canadians”
“Take for example the change to allow pension plans to develop larger surpluses than the old limit of 10 percent,” said Brown. “It’s a good idea, but unfortunately it comes about a decade too late. If this had been in place in the 1990’s when plans were forced to burn off their surpluses, and when many employers took contribution holidays, we would be in much better shape today. But what relief will it provide today when most plans are in a deficit position?”
“The cold hard truth is that pretty much none of what Minister Flaherty has proposed will make any real difference to those plans that are currently in funding crisis.”
“He has failed to address one of the most important immediate issues facing pensions – the lack of pension protection when a company faces bankruptcy. Pension plans get to go to the back of the line when it comes to claims on the assets. Mr. Flaherty’s proposals don’t even speak to that.”
Brown noted that the small steps to assist pension plans pale by comparison with the kinds of help this Minister gave to other groups, most notably the banks in Canada.
Earlier this year the government quietly rescued Canadian banks by purchasing $65.5 billion worth of questionable mortgages from Canadian banks, and that number has continued to go up. A recent study by the CCPA says the total amount handed over could easily reach $200 billion. This kind of direct support from the taxpayer has allowed the banks to stay profitable and to hand out those obscene bonuses we’ve heard about. Meanwhile, some pension plans are in danger of crashing and thousands of workers across the country are facing the possible loss of their pensions.
“One would think that workers’ pensions are more important and worthy of public aid than bank profits.”
Flaherty’s proposals also failed to address the biggest pensions issue Canada is facing – the fact that less than four of every ten Canadian workers have access to a pension plan. These workers rely mainly on the CPP when they retire.
In the last year there has been growing momentum to look at expanding the Canada Pension Plan as a way to increase retirement security for Canadians. The Canadian Labour Congress and the federal New Democratic Party have made specific proposals to double CPP benefits and even the President and CEO of the CPP Investment Board, David Denison, has suggested expansion of CPP as a preferred option to address the lack of workplace pension coverage.
NUPGE has long argued that employers without a workplace pension plan should have to pay double the CPP premium, and their employees should get higher CPP pensions.
Mr. Flaherty reforms made no mention of a greater role for CPP in providing more Canadians with retirement security. The only changes contemplated in CPP by the Harper government were proposed amendments to CPP legislation announced by Mr. Flaherty in May of this year. Those changes were designed to make it far less attractive to retire early, and far more attractive to delay retirement till 70.
“Mr. Flaherty’s series of pension reforms does nothing do to encourage the establishment and growth of new pension plans and little to protect current pension plans facing funding shortfalls, said Brown. “You’ve heard the expression ‘using a shotgun to kill a fly”? Mr. Flaherty used a rubber sword to pretend he was attacking a dragon, but it was all a show.”
NUPGE
The National Union of Public and General Employees (NUPGE) is one of Canada's largest labour organizations with over 340,000 members. Our mission is to improve the lives of working families and to build a stronger Canada by ensuring our common wealth is used for the common good. NUPGE
More information: