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Op-Ed: Canadian pension news headed for top spot in 2010

By Bill Tufts     Jan 4, 2010 in Business
Last year, a Digital Journal editorial predicted pensions would be a big issue in Canada in 2009. This became a reality and we can expect more of the same in 2010.
At a recent Finance Minster's conference in Whitehorse, Canada the Canadian federal government released a report from Jack Mintz saying that there is no pension crisis.
The Report on Retirement Income Adequacy looked at some of the issues surrounding retirement income security for Canadians. In the report Mintz highlighted that Canadian seniors do suffer from poverty. Most Canadians retire with a replacement income of nearly 90 percent of their final working income.
We contend that there is in fact a retirement crisis in Canada. It is based on taxpayers of the baby boomer generation funding platinum pensions for the public sector. The Canadian Federation of Independent Business, the CFIB came out with a release that is calling for restored Fairness for all Canadians on pension inequity " It is unconscionable that Canadian taxpayers are on the hook for public sector pension plans when half of the Canadians working in the private sector will not even benefit from any form of retirement savings."
The federal government assertions came at the same time as the CD Howe Institute released a report that shows how large the liabilities of Canada's public sector pensions really are. They released the report as The Startling Cost of Federal Government Pensions
Enhanced Public Information
One of the complaints from the CFIB was the lack of disclosure or information about Canada's public sector pensions plans. However, a side benefit of the Whitehorse conference is that leading up to this meeting more information has become available about the costs of these pensions.
A recent government report from Statscan, the government's information agency, was released showing the value of pensions in Canada.$1.8 trillion in pension assets in Canada at the end of 2008.
This $1.8 Trillion is composed of:
* Pension plans - $ 1,064 Billion
* Individual savings plans including RRSP's - $631 Billion
* Social Security including CPP - $140 Billion
A further analyze shows that of the total pension plan assets, $555.7 Billion is held by public sector employee pension plans. Canadians taxpayers have funded far more into public sector employees pensions than they have into their own plans.
The last Statscan Labour Survey shows there are 16.873 million working and self-employed Canadians. There are 2.8 million public sector employees in pensions plans in Canada. This means that 17 percent of Canada's workforce are public sector employees with pension plans. However, they control 33 percent of the total retirement assets in Canada.
On an average basis each working public sector employee has retirement assets worth $198,464. On the other hand the average Canadian, including those in pension plans have retirement assets worth $81,000. Those not in in pension plans have an average individual retirement account of $65,000.
Retirement Income
Statscan reports that there is a big gap in retirement income between those with pension plans and those without. What this means is that retirement will be an unfulfilled fantasy for many Canadians.
" Another strategy for those who have not saved enough for a comfortable retirement is to continue working past age 65. ..Overall, just one in eight 69-year-olds relied on employment or self-employment earnings for at least a fifth of their income, and only one in twenty-five earned enough to account for more than 60 percent of total income. The income profile of these older workers suggests that many are self-employed professionals who likely do not have substantial employer pensions. " reports Statscan.
We estimate that it appears that over the past 20 to 30 years taxpayers without pension plans have contributed an average of $65,000 into their retirement plans. At the same time they have contributed into public sector pension plans so that the average public sector worker has close to $200,000.
The CD Howe shows that taxpayers are on the hook for big pension liabilities. Based on the number of employees in the federal pensions plans, assets "are some $145,000 per contributor short of obligations" and to taxpayers these pensions represent "a net obligation of $197.7 billion".
Indeed it will be a taxing year for Canadians as they struggle to fund these public sector pensions.
This opinion article was written by an independent writer. The opinions and views expressed herein are those of the author and are not necessarily intended to reflect those of
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