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More than $900 million loss in investments rocked by the U.S. credit crisis
Ottawa (25 July 2008) – The Public Service Alliance of Canada, the largest union representing federal public servants, is once again calling on the federal government to give it joint trusteeship of its members' pension fund. This comes after government-appointed pension fund managers announce more than $900 million loss in investments rocked by the U.S. credit crisis.
Last week, the Public Sector Pension Investment Board (PSP) tabled its annual report in Parliament showing a 0.3-per-cent loss, a sharp drop from the 11.3-per-cent gain in the previous year. It also represented the first annual loss since 2003.
PSP attributed the loss to $920 million the plan held in non-bank asset-backed commercial paper (ABCP). ABCP is corporate debt that is due within a year, and is backed by assets such as real estate and other commercial assets. The debt is usually bundled together in large amounts like stocks in a mutual fund. In the last couple of years ABCP have been hit hard by the plunge in U.S. housing prices and the rise in mortgage defaults there. Holders of this kind of debt have been forced to take huge writedowns of their investments in the last year.
The PSP manages close to $40 billion of pension fund assets for federal public servants, as well as members of the Canadian Forces members and the RCMP. It is run by a board made up of appointees selected by the federal cabinet without any representation from the members whose pension plans they manage or the unions that represent them.
Although there are funding deficits in some of the provincial public sector pension plans, those plans that are jointly trusteed have not faced nearly the same level of difficulty.
In a jointly trusteed pension plan, the responsibility for the financial health of the plan is shared equally between the employer and the union representing its members. Jointly sponsored pension plans in fact contribute, in an important way, to improved funding because they reduce the level of employer exposure to deficiencies. In jointly trusteed plans both the employer and workers (through their union) are both responsible for funding half of any deficiencies that arise with respect to their plans.
The National Union and its Components were among the first unions in Canada to gain joint control of its members’ pension funds. The first major victory in this area was with OPSEU when in 1984, the union was able to achieve joint trusteeship of their public service plan, one of the largest pension plans in Canada. Since then BCGEU, HSA BC and MGEU have fought hard for, and achieved, joint trusteeship of some or all of their members’ pension plans.
In May of this year, two other federal government employees union, the 55.000-member Professional Institute of the Public Service (PIPSC) and the 11,000-member Canadian Association of Professional Employees (CAPE) announced that they are launching a constitutional challenge which seeks to invalidate provisions contained in the Public Service Labour Relations Act prohibiting federal employees from negotiating protections and improvements in a variety of areas, including pensions