A message from the BC Pension corporation:
Anyone advocating the conversion of public sector defined benefit (DB) pension plan to defined contribution (DC) arrangement should research past experience carefully and be realistic about the likely outcomes, say Dr. Robert L. Brown, a retired professor from the University of Waterloo and president of the International Actuarial Association, and Craig McInnes, a business journalist and writer.
Their research paper Shifting Public Sector DB Plans to DC – The Experience So Far and Implications for Canada (ccplc.ca) found that DC pension plans are less efficient at generating retirement income and result in higher costs for employers and employees.
After examining the experience of five American and Canadian jurisdictions that converted their public sector pension plans to DC arrangements, the authors conclude that there were negative financial consequences in every jurisdiction for government, employers and members. The study found that:
- Dollar for dollar, DB plans, like the College Pension Plan and Municipal Pension Plan (MPP), provide better value
- Public sector DB plans in Canada, like the CPP and MPP, are efficient investors, generating 75 cents of every dollar they pay in benefits from investment returns
- DC conversions transfer significant risk to individual employees, jeopardizing their income security in retirement
- Inadequate retirement income will increase the need for taxpayer-support social benefits for seniors, and
- Retirees with inadequate retirement income will be more reliant on taxpayer-supported social programs, like the Guaranteed Income Supplement.Your membership in the College Pension Plan and Municipal Pension Plan is a valuable asset, to you, your family and your community. Find out more about your pension at StraightTalk available on the Pension Corporation website.
03/31/2015