When asked how things were going at a holiday get-together, a recently retired Ottawa teacher, quipped that retired life was like “winning the cash for life lottery.” He quickly clarified that it wasn’t a huge amount of money, but just a comfortable, regular cheque to rely on.
After more than three decades of full-time teaching including additional allowances, his pension is in fact better than most in Canada. But he is quick to explain that there really is no lottery. A strong Federation supporter, he recognizes that his pension is part of a hard won compensation package protected by his union. Pension contributions by employees are deferred wages. Contributions by employers are part of our compensation package.
What is perhaps most revealing is that, when asked if his quip could be quoted in a magazine article, the teacher agreed but declined permission to use his name. “People will take it the wrong way. It’s a touchy subject.” His concerns say a lot about the state of pensions in Canada today.
In fact, we need to talk about pensions. We need to talk a lot. We cannot be complacent.
Because pensions are under attack. Particularly good pensions.
While career teachers—especially full time teachers who achieve their 85 factor—receive a very comfortable pension, this is not the norm in Canada. The average annual pension for the Ontario Municipal Employees Retirement System (OMERS) members retiring in 2011 was $28,000, between 30 and 50 per cent of their pre-retirement salary.
According to Statistics Canada 38.1 per cent of all Canadian workers were covered by an employee pension plan in 2014. While plans were evenly split between the public and private sectors, public sector workers were significantly more likely to have defined benefit (DB) plans, whereas private sector workers held 70 per cent of defined contribution (DC) plans, and that gap is growing. Unlike defined benefit plans like the Ontario Teachers’ Pension Plan (OTPP) or OMERS, which offer a guaranteed pension at retirement based on years of employment and level of income, defined contribution plans require individuals to choose how their money is invested, and to assume the risk for those investments. This means retirement pensions could vary considerably between employees who have made the very same contribution, based on economic conditions at the time of retirement. Irrespective of these facts, we have all heard politicians and commentators promoting the myth of the “gold-plated” pension plan. A recent Maclean’s editorial even went so far as to blame public sector pensions for ‘income inequity’ in Canada. The editorial highlighted recent rounds of collective bargaining, where both auto workers and postal workers faced the threat of two-tiered pensions—defined benefit plans for current workers and defined contribution plans for future members—with very different results. And it suggested that the Canadian public should now target the pensions of teachers, firefighters and bureaucrats.
In The Third Rail: Confronting Our Pension Failures, co-author Jim Leech, former head of the OTPP, recounts a Russian parable that mirrors the same perverse attitude toward equality as that encouraged by the Maclean’s editorial. A farmer, whose best milker has died, is granted one wish by a golden fish. Rather than ask for another cow of comparable quality, the farmer instead asks for the neighbour’s cow to be killed. Leech argues that the story is a useful analogy to the current pension debate in Canada. While many Canadians envy what they perceive as gold-plated pensions, some would rather remove retirement security from those who have it than demand better pensions for all.
It does seem, however, that most Canadians do understand the importance of protecting pensions. IPSOS Reid found that more than 90 per cent of Canadians polled agreed that “employers should live up to the commitments they have made to pensioners and employees,” and that “in developing a new pension framework, the federal government should ensure that companies honour the commitments made to pensioners and employees.” As a society we understand the importance of security and predictability in one’s retirement years.
The Wealthy Barber author David Chilton popularized the concept of paying yourself first, and every financial advisor will argue that putting aside money each month is the best way to save for the future. In reality, few Canadians are able to, or choose to, save adequately for retirement when left to their own devices.
The beauty of workplace pension contributions is that they are compulsory and happen automatically. The labour movement is fighting hard to ensure that retirement security becomes an expectation, and a reality, for all Canadians. Retirement security was a priority for the Canadian Labour Congress during the 2015 federal election, and union activists continue to work towards a system where no one retires in poverty after a lifetime of work.
The Trudeau government is less committed.
On the one hand, the Canadian Labour Congress (CLC) celebrated an agreement reached in June 2016 to enhance the Canada Pension Plan (CPP). The mandatory program will raise contributions of employees and employers over the next decade. The changes will benefit younger workers the most. In addition, mechanisms are being implemented to ensure that low-income earners are able to make the additional payments. These changes are important because the CPP covers all workers, whether they have a workplace pension or not. And it is portable for those who change jobs over their career.
On the other hand, Bill C-27, An Act to Amend the Pension Benefits Standards Act, is seen by many as a huge threat to the pension system in Canada. Peter Whitaker, Central Region representative for the National Organization of Retired Postal Workers, believes that Bill C-27 is the most important issue facing unionized workers in Canada today, and that we need to join the discourse as quickly as possible, because big business, the finance industry and the banks are determined to eliminate defined benefit pension plans in Canada.
The legislation would provide federally regulated employers, including Canada Post, as well as rail, air transportation and telecommunication industries, with the possibility of modifying pension obligations through the introduction of targeted benefit pension plans. Like defined contribution plans, targeted benefit plans would shift the risk from employers towards employees. The CLC warns that “Bill C-27 would set an example across the country that other provinces would be invited to follow, giving private and public sector employers the green light to intensify attacks on DB plans in every jurisdiction.” In fact, the province of New Brunswick has already accepted ‘shared risk’ pension plans. Manitoba and Nova Scotia are considering versions of targeted benefit plans too.
Workers must also be aware of the Companies’ Creditors Arrangement Act (CCAA). Over the past several months, pensioners at Sears have been in the news, fighting to keep the pensions they had earned over the course of their careers. Currently, legislation and the courts favour shareholders over workers when a private company goes bankrupt. Sears employees and retirees are facing a 20 per cent cut in pensions. Private member bills from the Bloc Québécois and NDP aim to create federal legislation to classify pensioners as secured creditors. The Liberals have yet to announce a response. At the Ontario Federation of Labour convention in November 2017, Koskie Minsky LLP presented a workshop that outlined the problems at Sears. The central theme of their presentation was this: The creation and sustainment of defined benefit pensions is “almost entirely due to the trade union movement.”
OMERS and the OTPP are sustainable for the next seventy years, but employers and others are working hard to promote the myth of the unsustainable gold-plated pension plan. OSSTF/FEESO members must not only remain vigilant and ready to fend off attacks on our own pensions, but must also support the efforts of the broader labour movement to ensure that all Canadians have access to good pensions and financial security when they retire.