How will Trump’s tariffs affect CUPE members’ pensions?

CUPE members are rightly worried about how Donald Trump’s tariffs and recent market volatility might impact their pensions.

Our workplace pension plans generally work like this: contributions are collected from workers and employers, which are invested with the expectation they will grow in value over time. Even though contributions while working fund a portion of pension benefits, the majority comes from investment returns, which makes market performance critical to pension plans.

While stock markets have seen big swings in reaction to Trump’s tariffs, pensions are typically also invested across a wide range of other financial assets including bonds and real estate. The value of these assets does not necessarily move alongside stock markets.

Still, market uncertainty can have real implications that will differ depending on the type of pension plan.

In RRSP plans, “Defined Contribution” (DC) plans, and “Target Benefit” plans, members typically bear all of the financial risks. When markets perform poorly, there is no guarantee of benefits, and payouts may be reduced. There are strategies to navigate those challenges, which vary according to type of plan, but they do have serious limits. Workers in these plans who are concerned can speak to their plan administrators – which is often, but not always, the employer - to better understand the implications on their pensions and what options they may have.

This is why CUPE has traditionally preferred “Defined Benefit” (DB) plans which provide a secure, predictable pension promise that, once earned, will not be reduced if markets underperform. Workers need and deserve this kind of retirement security.

However, DB plans are not entirely risk-free for workers. If market returns fall short, workers and employers may have to increase contributions to offset market losses. Employers may also try to offset increased pension costs at the bargaining table. Some DB plans guarantee most benefits, but may suspend inflation protection (indexing) in tough financial times.

Fortunately, most CUPE DB pension plans are better positioned today than during the 2008 financial crisis. Federal tax rules now permit DB plans to carry larger surpluses, providing buffers against market losses. CUPE hopes that, if necessary, these surplus buffers would be used as intended to keep plans balanced and protect members’ benefits.

Employers tried to take advantage of the 2008 financial crisis to shift pension costs and risks over to workers. If they try that again, CUPE will be there to defend our members’ interests at bargaining tables.

We should also remember that the benefits provided under our public pension programs – Old Age Security (OAS), the Guaranteed Income Supplement (GIS), and the Canada and Quebec Pension Plans (CPP-QPP) - are not tied to stock market performance. These public plans provided inflation-protected benefits that remained secure during the last financial crisis. Thanks to CUPE and the labour movement, CPP/QPP benefits have recently been expanded to their highest levels ever, and should be improved further.

In an ideal world, workers’ retirement security would not be tied to the ups and downs of financial markets. But because our pension system is deeply tied to investment returns, workers remain  exposed to market risks in different ways.

But rest assured, with experienced pension specialists, committee members, and trustees in plans across the country, CUPE is well positioned to help our members navigate these challenging times with strength and solidarity.