Future of Government Pensions (PS, CF & RCMP) & CF pension "double-dip"

[OldSolduer]

Did not plan ahead?  Too bad, so sad.  You get your old age security and CPP.  The country should not have to take the burden because you did not plan ahead.

On other topics, lots of people here preach personal responsibility (just looking at the Occupy Movement thread...).  Because you are old doesn't make you all of the sudden special. 

I am a big proponent of personal responsibility.  Across the board.

As am I. But to toss the over 65 crowd to the wolves without support is cruel. A society is judged on how well it takes care of its elderly and animals.

 

[SupersonicMax]

As am I. But to toss the over 65 crowd to the wolves without support is cruel. A society is judged on how well it takes care of its elderly and animals.

OAS and CPP are a little more, than say, tossing the crowd to the wolves.  They have support.  Yes, basic, but enough to live.  Maybe not as comfortable as they want, but that's nowhere near cruel.  These programs are in place to prevent exactly that.

We could turn your sentence with any group.  "But to toss the 99% crowd to the wolves without support is cruel"  How does that sound??

 

[navymich]

Besides, there are many underlying factors that may have prevented the stockpiling for a winter day.  Or that have depleted that stockpile.  Things such as sick/disabled children or spouse, household expenses/repairs, cost of nursing home, education debts, etc etc.  Or even the fact that the plan started late due to debt, divorce or any of the items mentioned above.  There are many seniors that pick up a part-time job to help with expenses.  But those jobs aren't always easy to come by (something about young'uns that want them too?  )  So if they were able to keep their regular job to help themselves continue without being dependent on others, would you fault them?

 

[krustyrl]

:goodpost:

I for one started my plan later than expected due to a sick and disabled spouse.  Just doing the best I can and things are looking better.

 

[Edward Campbell]

We are at a point, in human 'development,' at which, even if we gave everyone the financial means to live their lives in relative security and comfort and to make adequate provisions for their retirement, most people cannot (or will not) do the necessary things. We have also learned that, despite the fact that people cannot/will not care for themselves, society (AKA government) cannot do it either. We have 'evolved' a lot since Bismarck introduced the nanny state back about 140 years ago. (That's right, children, the modern welfare state was introduced, with the best of intentions, by the old iron chancellor.)

The arch-liberal Bismarck

Assuming, as I do, that we don't want to have tens of thousands of homeless people, including school children living on the streets of medium sized cities like Calgary or Hamilton and assuming that we don't want to sweep up dead bodies on an almost daily basis, we need to have some mechanism to marry up personal responsibility (and I agree with Max that we all must be responsible for ourselves), private (non-state) charity and public (state) support so that only a few people are homeless and starving and so on. I think we, currently, have unsound expectations - we (most of us) have, since about 1970, come to believe that the correct "mix" is public welfare, private charity and, only if absolutely necessary, a wee tiny bit of personal responsibility.

Unless Max and his generation are a whole helluva lot more fecund that were his parents and grandparents, or unless we import a whole lot more hard working, productive Chinese people, then our (the majority's) expectations are unaffordable.

 

[a_majoor]

There is no "one size fits all" solution. Things that will help include greater labour mobility (getting people to go to where the jobs are), greater wealth creation (so there are more jobs), detaching benefits from jobs (so workers can move benefits and savings with them if/when they change jobs) mostly through insurances and RRSP/TFSA type accounts and so on.

Stagnation within organizations is indeed a huge problem, but even there performance based evaluations such as the "up or out" policy of the US military "could" be made to work if the mechanism was objective and enforced (gaming the system and "ticket punching" are two obvious drawbacks to these sorts of systems if they are not monitored or allowed to drift into cronyism).

As for circumstances beyond your control, such as illness or life changing events, in the past there were families and charities to go to, and this may have to be the model in the future as nations slide deeper into debt.

 

[SupersonicMax]

Besides, there are many underlying factors that may have prevented the stockpiling for a winter day.

Yup.  MOST of the reasons (not ALL of them) are because of a decision the person made, one way or another.  I know someone that is almost completely paralized (she can move her head and part of the right hand) and guess what, she worked for the last 35 years.  She is going to retire this year with enough to do whatever she wants and live wherever she wants.  Despite the fact she had to pay for homecare, home remodeling to accomodate her needs, etc, etc.  When there's a will there's a way. 

For the reasons that are out of one's control there is usually a social program to offset some of the burden.  And that's okay.

If people want to go to Unversity and get a degree in Basket Weaving and for some "magical", unknown reason, they cannot get a job, maybe looking back at the decision of going to University in Basket Weaving may be the root cause.  Maybe picking something that was more marketable would have been a smarter choice.  In that case, because someone makes bad career decision, the younger generations should take the burden of paying for them?  I think not.

Divorce?  Same thing.  It's all about personal responsibilities.

 

[GAP]

Nice discussion........by a bunch of people, most of whom are sitting on a comfortable pension at the end of 20/25 years.............ah, such sanctimony.... :

 

[armyvern]

As am I. But to toss the over 65 crowd to the wolves without support is cruel. A society is judged on how well it takes care of its elderly and animals.

My mother is actually like one of our current younger-generation who will be the future 17 career-in-a-lifetime kids. She will be one who will work well into her later years --- yet another knock-off of being a military spouse who has worked throughout her life, but with postings or non-job opportunities at some of those postings so has never been able to work towards a pension. I agree with this latest change to legislation as there are thousands of people out there like her in this country and none of them should be thrown to the wolves.

For me, this does not SOLVE the issue though, all it has done is pass it down to the next generation who will now experience the exact same thing on a much wider and grander scale as their opportunities to enter the workforce into a 'pensionable' long-term career have essentially all but vaporized. These pers too can not be thrown to the wolves and it is my belief that we need to come up with a solution to that "long-term" effect of this new policy now --- I believe that it is our generations duty to do so.

Someone earlier posted about they'd better start paying into RRSPs now etc and take some responsibility for their futures. All well and good and quite proper a thought. But, when looking forward to a lifetime of part-time, minimum wage, non benefit paying (such as dental) jobs with no guarantee of even holding those jobs "year-round", I'm going to wager that even those who are extremely personally responsible will have very very minimal contributions to such because the work force they are looking forward to participating in does not allow one to support themselves with the basic necessities that are required to live in their youth (we already have a preponderance of 'double income' households barely surviving due to the exact same types of "employment" on this basis) ... let alone allow RRSP contributions enough to allow them to survive without truly significant social programming in their later years.

We needed this legislation - it solves our generations problem. Now, what do we do to solve the problems that our fix has just created for our kids and their kids? Or, do we just skip that because it's not our problem and throw them to the wolves instead?

 

[Brad Sallows]

The people thrown to the wolves are actually the younger generations.

The critical error in the creation of all the entitlements of the welfare state was not paying the full cost of the freight up front.  Each additional layer of welfare essentially created additional financial freedom.  The boomers essentially set up to tax future generations (deficit spending is simply future taxation moved into the present) for benefits payable to the boomers even as the boomers simultaneously elected to birth and raise fewer future taxpayers.  The boomers used their increased financial freedom (welfare and smaller families) in part to pursue bigger and better homes.  So the up-and-coming generations have higher hurdles to cross with respect to affordable family formation, even as they are charged to pay for themselves and their parents/grandparents.

A novel way of looking at the prospect of reduced retirement bennies for boomers would be this: they charged some of their goodies to the future; the future is now - pay up.  People who argue that they paid into CPP and are due have in fact already received their due.

 

[McG]

This is not the first time I've seen this topic pop-up recently.  It looks like an interesting debate is looming on the horozon.  Hopefully, we make out well in the end.

A public concern in the nation's capital
Federal employees' generous plan leads to questions about sustainability - and whether it's a proper use of our tax dollars
Peter O'Neil
Vancouver Sun
16 Jan 2012

A tiny group of British Columbians are part of a federal public sector pension plan that is under increasing scrutiny from critics who say it is both unsustainable and overly generous.

Private sector interest groups and think-tanks like the Canadian Federation of Independent Business and the C.D. Howe Institute argue that the federal scheme should be reformed and made less generous in the coming 2012 budget.

The system is "not sustainable," according to C.D. Howe president Bill Robson.

There are 423,781 active contributors to the public service, RCMP and Canadian Forces pension plans, representing about 2.3 per cent of the Canadian workforce of 18.7 million. While officials couldn't provide accurate figures for the number of federal pension members in B.C., Statistics Canada says there were 41,000 people in B.C. on the federal payroll in 2010, making up about 1.7 per cent of the 2.45-million members of the provincial workforce.

The 317,000 members of the Federal Public Service Pension Plan can retire as young as age 55 if they have worked for at least 30 years, and on or after their 60th birthday if they've put in as few as two or more years of pensionable service.

And some in more challenging positions, like the RCMP and prison guards, can retire at any age as long as they've worked for 25 years. Canadian Forces members, meanwhile, can retire after 20 years of service.

Anyone in a federal plan collects two per cent of the average of their top-five salaried years - this is usually, though not always, their last five years - so 25 years of service would net a member 50 per cent of their top average annual salary over their best five years.

Those who stick in for the long haul and work at least 35 years can earn a maximum 70 per cent of their best five earning years. For a senior mandarin, such as a department-running deputy minister now earning a maximum salary of $195,300 a year, that would mean a pension of close to $140,000, indexed to inflation.

The average public service pension earned by the current 238,000 retired members and their survivors was about $25,000 in 2009-10.

But that average is rather misleading, according to pension consultant Malcolm Hamilton, since it includes public servants who have only worked a few years in the bureaucracy.

For all those benefits, federal employees pay 5.8 per cent of their annual salary up to $48,300 into the pension scheme, and 8.4 per cent of their salary above that amount.

Members are now paying about 35 per cent of the plan's costs, with taxpayers picking up the rest - although the federal government has taken steps to move up the employees' contribution to 40 per cent by 2013.

Critics say Canadians can't afford to subsidize gold-plated pensions, with the C.D. Howe Institute arguing retirement ages should be raised and employee contributions jacked up to at least a 50-50 basis with employer (that is, taxpayer) contributions.

They also argue that the current gap between public and private sector schemes paves the way for deep resentment as more and more public servants hit retirement age. "One group of retiring Canadians is set to raid the public treasury for billions of dollars in guaranteed, indexed pensions," write Bill Tufts and Lee Fairbanks in their new book, Pension Ponzi: How Public Sector Unions are Bankrupting Canada's Health Care, Education and Your Retirement.

Catherine Swift, of the Canadian Federation of Independent Business, said her group has calculated that the salaries, perks and pensions of federal public servants is 40-per-cent higher than equivalent posts in the private sector.

"They're not sustainable and we see this happening around the world. Basically promises were made often decades ago under pressure [from unions] and nobody ever did the proper monitoring as circumstances changed," Swift said, citing longer lifespans as one factor.

C.D. Howe, in an analysis released a year ago, said the Canadian public service pension plan is facing a similar kind of bubble as government pensions in the U.S. and Britain, where there are unfunded pension liabilities measured in the trillions of dollars.

Pension consultant Hamilton said the government deviates from the accounting standards used in private sector plans by failing to take into account the rock-bottom interest rate environment.

"They materially and disastrously understate the cost of that plan," Hamilton told The Vancouver Sun.

But Linda Duxbury, of Carleton University's Sprott School of Business, said private sector critics like Swift seem to be arguing that all Canadians should be dragged down to the level of private sector workers, who in many cases have no employer pension plans.

"I get tired of the groups who go, 'Look at how well public servants are being treated.' They seem to be saying, 'We should treaty everybody badly,'" Duxbury said. "I'm not saying they should go to the gold-plated model of the public service, but I am saying that in many of these sectors they offer nothing."

Both the federal government and its unions deny the federal pension plans are unsustainable.

"The Government of Canada places great importance on the financial integrity of its public sector pension plans," said Treasury Board spokeswoman Anabel Lindblad, noting the pension system has passed inspection by the auditor-general's office, as well as a review by a private consulting firm.

The Public Service Alliance of Canada, which represents 172,000 public servants, calls the C.D. Howe study a red herring.

PSAC president John Gordon noted that the chief actuary of Canada's 2008 report showed a surplus in the public service plan. "When they talk about gold-plated pensions they should take a look at what the CEOs of this country are getting," Gordon said.

While there is growing speculation that the Tory government will take a hard line on pensions, any tough decisions raise questions of hypocrisy if they don't also trim their own platinum scheme. MPs collect three per cent of their best salaried years for every year of service, only have to serve a minimum six years in Parliament, and can begin collecting at age 55. In other words, MPs with 25 years of service would earn 75 per cent of their best five years, compared to 50 per cent for a public servant in the plan.

The 113 defeated or retired MPs after the 2011 election are estimated to earn $1.1 billion over their lifetimes, according to the Pension Ponzi authors. Seventeen of them are now drawing six-figure pensions, including ex-Bloc Quebecois leader Gilles Duceppe, who is receiving $141,000.

"It's going to be a very powerful debating point for the unions to say, 'Why are you doing this to us when your pension plan is still in the same bad condition that you're complaining about with ours?'" said C.D. Howe's Robson.

 

[dapaterson]

A few thoughts:

First, fact checking is not the writer's strong suit.  Since 2007, new CF members must serve 25 years, not 20, to qualify for an annuity under the CFSA.

Second, the article conveniently ignores that any actuarial deficits are greater than expected due to the Federal government removing significant surpluses in the 1990s.  It's similar to Lizzie Borden asking for mercy from the court because she's an orphan.

Third, it's ridiculous to state that the analysis should exclude low pension amounts.  Spurious logic to advance the casue serves no one's interest.

Fourth, pension plans do have to be re-examined over time to ensure they meet the need.  Lifespans have lengthened.  There is concern about a loss of knowledge and experience; altering plans to encourage longer-term retention might be advisable.

My suggestion?  For the Public Service, at least, move from 2% per year for a maximum 35 years to 1.8% per year to a maximum of 40 years.  The maximum is slightly increased, but personnel will have to stay 14% longer (five more years) to max out.  Longer service would also reduce long-term pension costs, as people would draw benefits for fewer years.  By lowering the benefit and maintaining the employee contribution rates a better balance between employer and employee contributions would be established.

 

[Infanteer]

I've never heard my own pension being termed as "gold-plated"....

The pension is a valuable tool; it serves to motivate professionals to stay in and dedicate themselves to their organization.  This is just my opinion, so take that for what it's worth, but I know I feel good about the time I put in uniform understanding that in 21 years I'll get something back.  I'm sure many fellow members feel the same.

That being said, I see know problem with increasing the member's portion - as discussed, the CANFORGEN was released last weak detailing the increase for this FY.  As well, I see no issue with dapaterson's proposal; people are working, and enjoy working, for longer periods of their life.

 

[mariomike]

My suggestion?  For the Public Service, at least, move from 2% per year for a maximum 35 years to 1.8% per year to a maximum of 40 years. 

Pension accural rates for certain occupations have recently improved  from 2% to 2.33%.
Members can now "max-out" in 30 years.
http://www.omers.com/pdf/2010_2_33_Accrual_Rate_Benefit_Tables.pdf

"The Province is dismissing the best interests of OMERS members, pensioners, municipalities, tax payers and the long-term viability of the OMERS Pension Plan, by ensuring that police, firefighters and paramedics have access to supplemental benefits, regardless of the cost.":
http://www.amo.on.ca/AM/PrinterTemplate.cfm?Section=Bill_206&Template=/CM/HTMLDisplay.cfm&ContentID=49082

 

[Container]

I havent seen another thread where someone demanding to be allowed to work while they are fully capable are included with the "entitled".

 

[PMedMoe]

Well, I'm thinking the Members of Parliament won't be too concerned about our pensions as long as theirs don't change.

MPs get 'platinum-plated' pensions

Depending on where you're standing it's either the ultimate in freedom 55 - or "a ripoff on a massive scale."

It's MP pensions, and a bombshell report released Wednesday by the Canadian Taxpayers Federation points to just how rich those pensions really are.

"It's probably the best funded pension plan on Earth right now," said CTF federal director Gregory Thomas.

More at link

Not that I'm shocked or anything.  :

 

[Infanteer]

We had a debate on this a while back, and it was a good one.  I certainly don't begrudge a good pension for an MP - we need the right benefits to convince talented professionals to walk away from their (probably prosperous) ventures.

That being said, they probably wouldn't be starving in the streets f they, like everything, took a 5 to 10% cut (or more) in this era of belt tightening.

 

[GAP]

Yeah, the optics would be encouraging.....

 

[SeaKingTacco]

...Or go more towards a self-directed RRSP while they serve as MPs, co-funded by the Crown.  When they retire (or are defeated) they keep the RRSP fund and then are given a (generous) gratuity, based on years of service completed in Parliament.

This method would allow Canada to rightly renumerate MPs for a difficult job, but once they are out of Parliament, the cost to Crown ceases also.

 

[a_majoor]

Well, MP's can now join the party. Any bets they will eat the shortfall and let taxpayers off the hook? /snark

http://www.citytv.com/toronto/citynews/news/national/article/181684--mps-pension-plan-faces-1b-shortfall-report

MPs' pension plan faces $1B shortfall: report
01/19/2012  | The Canadian Press

A report from a prominent think tank says Canada's parliamentarians are facing even graver pension woes than the rest of the country.

The C.D. Howe Institute says the pension plan that secures retirement benefits for members of Parliament and senators is underfunded by up to $1 billion.

The report says the plan provides MPs with more than 50 per cent of their six-figure salary, but has no assets set aside to pay for those future benefits.

The institute says the funding shortfall is at odds with actuarial reports on the plan, which say it has an excess of $176 million.

The institute says the deficit could expose taxpayers to greater financial risks if the pension plan ultimately fails.

It suggests the federal government should address the problem by raising MPs current wages in exchange for lower retirement benefits.

"When the time comes to pay cash to retiring MPs, Ottawa has to raise it at that time — by taxing more, spending less elsewhere, or borrowing," the institute said in its report.

Such a fix, the report said, would allow MPs to set retirement funds aside in registered plans without delving as deeply into the public purse.

The institute's plea for reform echoed a similar call issued Wednesday by the Canadian Taxpayers Federation, which exhorted MPs to surrender their pension plan and adopt a more modest system.

The federation contends the existing plan is the best-funded in the world, but lamented that taxpayers foot the bill for most of its perks at a rate of $23.3 for every dollar contributed by an MP.

The federation called on MPs to set up a new program in which government matches their payments on a dollar-for-dollar basis.

"There's no way the prime minister and these MPs can do what they need to do to balance the budget and control spending if they've got their own snouts in the pension trough," federation federal director Gregory Thomas said. "They need to lead by example. They need to put Canada ahead of their own personal bank balance."