« Where are the anti-sweatshop nations? | Main | Inside the hostile, secretive work environment at Apple »

January 19, 2022

Should public-service employees pay more towards their pensions?

In case you missed it, this week marked the most recent skirmish in a much larger battle to bring burgeoning public-sector compensation costs under control.

Basically, the federal government wants public sector workers to contribute more towards their pensions, largely so you and other taxpayers don’t have to. Depending on whose numbers you use, there isn’t going to be enough in the vault otherwise.

It’s clearly a big shortfall and the fiunding gap is growing. The C.D. Howe Institute warns that the unfunded pension liability for federal workers is some $80-billion higher than noted in the public accounts.

To stem the tide, the government is phasing in an increase in employees' share of pension contribution rates to 40 per cent by 2013 – it has been as low as 25 per cent in past years.

But that’s likely still not enough. Many analysts say the employee contribution rates should be closer to 50 per cent, the matching formula used by several other big pension plans.

"There seems no credible reason why the federal plan would limit employee contributions to 40 per cent," James Lahey, an Ottawa bureaucrat who studies pensions, told the Ottawa Citizen this week.

"Moving to 50 per cent at the federal level would be controversial and would need to be phased in over several years, but it could be done."

Whoa, says the Public Service Alliance of Canada, we're already doing our bit and that wasn't part of the deal. In fact, the public's notion of just how our pensions work is way out of whack. Here's PSAC's take on what it sees as the real story.

Where do you stand? Is it time for public-sector workers to shoulder more of the pension burden?

By Gordon Powers, MSN Money



Post a comment


Gordon PowersGordon Powers

A long-time fund company executive, Gordon Powers now heads up the Affinity Group, a financial services consulting firm. Gordon was a personal finance columnist for the Globe & Mail for many years, has taught retirement planning...

Jason BucklandJason Buckland

The modern-day MC Hammer of money, Jason can often be seen spending cash that isn’t his with the efficiency of a Wilt Chamberlain first date. After cutting his teeth as a reporter for the Toronto Sun, he joined the MSN Money team with...