The following letter, written by CUPE National President Paul Moist, is a response to opinion pieces from the Fraser Institute published Sept. 20 in the Financial Post; “The public-private pension divide”, and the Vancouver Sun; “B.C. must address problem of public service pension plans”.
Claims from the Fraser Institute that defined benefit pensions are ‘unaffordable’ and put taxpayers on the hook for ‘bail-outs’ are just a distraction from the real pension crisis – the over 11 million Canadians that don’t have a workplace pension plan.
The Fraser Institute analysis of public sector pensions is fundamentally 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 1990s, employers were able to reduce, and even eliminate, their contributions to defined benefit pension plans.
Employers who benefited from surpluses and contribution holidays, including governments, cannot simply walk away from their responsibilities during the difficult times.
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 all 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 and portraying them as excessive or ‘gold-plated’ ignores the value they have for workers and the overall Canadian economy.
Defined benefit pensions are recovering from the global financial crisis. Financial markets and interest rates are trending up, and surveys show pensions health is improving across Canada. Abandoning them is shortsighted and irresponsible of any employer, private or public sector.
Governments need to get past red herrings like the Fraser Institute report that only aim to drag down pensions. We must concentrate on bringing retirement income security to those who need it most – the 11 million Canadians without a work place pension plan.
This can most effectively and affordably be done with an expansion of the Canada Pension Plan. Through gradually increasing contributions paid by employers and workers, we could double CPP benefits. This is a real solution to ensuring as many Canadians as possible can retire with dignity.
Canadian Union of Public Employees