Summer fiction: Conservatives working on pensions

Larry Brown, NUPGE's national secretary-treasurer, says the Harper government is misleading Canadians on pensions issues. Instead of responding effectively to the crisis, the government is stalling and even moving backward, he argues.

By Larry Brown
National Secretary-Treasurer
National Union of Public and General Employees (NUPGE)

Ottawa (21 Aug. 2009) - According to the federal Conservative government, it has been “working hard” this summer on the country's national pension crisis.

Ted Menzies, parliamentary secretary to the minister of finance, made this claim recently in a letter to the Halifax Chronicle Herald. Before we review the veracity of his claim, let’s first refresh our memories about the pension crisis itself.

For one thing, we have seen, as the most prominent example of the genre, the heart-wrenching spectacle of Nortel's older workers and retirees facing the potential loss of their pensions after years of service to the company. They face the real possibility that the pension plan to which they have contributed for years might evaporate into thin air, while their former company is sold offshore. Unfortunately there are lots of Nortels out there, with more to come, where workers face losing the pension plan they paid into throughout their working career.

Mr. Menzies makes no mention of action taken by his government on this issue. 

60% have no pension plan at all

Over 60% of the Canadian workforce has no pension other than the Canada Pension Plan (CPP). CPP pays $10,900 per year maximum, plus there’s Old Age Security (OAS), at some $6,000, so the most income Canadians can receive from our public pension system is $16,900 a year.

Those lucky enough to have been able to contribute to an RRSP have experienced huge losses to their retirement savings as a result of the current economic crisis. Then there are some 6.3 million working Canadians who have neither a workplace pension nor an RRSP. Meanwhile, we’re on the cusp of a retirement wave as a record number of Canadians will be retiring soon.

Mr. Menzies makes no mention of action taken on this issue.

In the face of this pension crisis, many companies have abandoned their obligation to provide pensions for their employees by moving to a system that simply accumulates a pot of money but does not actually provide a pension. This is called a defined contribution (DC) pension but in reality it’s a simple savings plan.

The Kerry decision

Now the Supreme Court of Canada has ruled (in the Kerry decision earlier this summer) that an employer can use surpluses from their employees’ defined benefit (DB) plan to meet its funding obligations to another group of employees covered by a DC plan.

This decision is a victory for employers and a setback for those working to keep DB pensions. In fact, it is almost an invitation to companies to consider converting DB plans into a much less effective DC plans.

As Steven Barrett of Sack Goldblatt Mitchell has said, the decision “reinforces the call for government and legislative action to enhance the pension plans of workers who are facing retirement. [The court] in fact says it is up to legislatures and governments to develop pension plans that protect workers."

Mr. Menzies makes no mention of action taken on this issue.

So on which parts of the pensions crisis does Mr. Menzies claim the federal government has been “working hard”?

Hollow claims

First, he says, the government “released a major research paper on federally regulated pension plans."

Then, he reminds us, there were cross-country public consultations to gather input on "reforms" to pension plans in the federal sector – which for the most part were designed to weaken pension funding rules.

These consultations were announced on March 4, 2009, and started March 13, 2009, a maneuver clearly designed to preclude input from Canadians.

Union activists rose to the challenge and packed each of the consultations to demolish the case for weaker pension rules and demand instead that the government protect and strengthen pensions. Our position was clear and consistent: no changes to solvency funding rules without the consent of workers; change tax and bankruptcy law to ensure workers pensions are protected; and improve the CPP and OAS.

Mr. Menzies says in his letter: “Based on the feedback we received, comprehensive regulatory changes to improve the federal pension framework are being drafted and will be released shortly."

We have yet to see how these changes will protect and strengthen workers.

Empty 'actions'

Mr. Menzies also includes in his list of ‘actions’ that his government “raised the issue at the annual meeting of finance ministers in late 2008 and, earlier this year, set up a research working group – with academic Jack Mintz as director of research – to conduct an in-depth examination of retirement income adequacy.”

This is the very same Jack Mintz who has declared his opposition to new public pension plans, and is a strong proponent of individual savings through RRSPs. He is on record as a fervent defender of individual responsibility for retirement savings.

In fact, Mr. Mintz has called recent provincial proposals for new pension systems “a dangerous new idea” that would “create a non-taxable competitor over private companies such as banks and insurance companies.”

Safe to say this is not a good starting point for independent research.

6% cut for early retirees

It’s interesting to note that Mr. Menzies does not include, in his list of stellar achievements, the federal proposals to change the CPP, announced in late May.

Under these proposals, employees who want to retire early are going to be hit hard by a further 6% reduction in their already greatly reduced CPP benefits – a cut that will last for the rest of their lives. 

Meanwhile, workers will be induced to continue working until age 70 with a 30% increase in their CPP benefits.

The Harper government’s spins the CPP changes as “progress, flexibility and fairness.” In reality, the changes are intended to pressure workers to stay in their jobs until 65 and beyond. Looking past the spin, the result is less employee choice about when to retire.

A sad situation

Canada has a pension crisis. Over 60% of workers do not have a pension plan and there are too many plans that may not deliver the pensions they promise because of the economic meltdown. The Supreme Court has declared open season on the only real pension plan, a defined benefit plan. The only security programs that millions of Canadians have to rely on – CPP and OAS – do not provide adequate retirement income.

In the face of this multi-pronged crisis, it’s critical that the federal government begin to take real action on pensions and retirement security. Mr. Menzies says the government “is working to protect current pensioners and give future pensioners confidence. While others play catch-up, we’re delivering results.”

Wrong, Mr. Menzies. While Canadian employees are looking at a poverty level retirement, you aren’t playing catch-up. You’re playing politics.

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