Let’s work on fair pension plans for all

By MPP Toby Barrett

All working people should have a fair and equal chance at a pension – however this is not the case in Ontario.

I think of my neighbour who works very hard and pays a lot of taxes to government – but he doesn’t have a pension. Why is he asked to pay taxes every year to support a government worker’s gold-plated pension, when he has no pension at all? Ontario’s pension system needs to be fair for everyone – not gold-plated for some and non-existent for others.

Fewer than two of ten workers in the private sector are covered by a defined benefit pension plan – most private sector workers, in fact, have no company pension at all.

In contrast, 94 per cent of public servants have a defined benefit pension plan which offers guaranteed benefits and is low risk for employees. Defined benefit plans put the onus, and inherent risks, on the employer –in the public sector’s case, on the government and the taxpayer.

Defined contribution plans on the other hand, have the employer and employee each committing to a specific contribution rate with employees absorbing the financial risk. I will note MPP’s like myself do not have the lucrative defined benefit pension plan – that was eliminated by then-premier Mike Harris in 1995. A defined contribution plan based on the purchase of RRSPs is in place for provincial MPPs.

Last spring, I introduced legislation to offer defined contribution pensions for newly-hired public sector workers in my Private Members Bill 94, Addressing Ontario’s Debt Through Alternatives to Public Sector Layoffs and Program Cuts Act.” The Liberals and NDP defeated my bill.

Ontario’s various agencies, municipalities, hospitals, schools and universities are spending an ever-increasing amount of taxpayer’s money to pay for the pensions of public servants because of low interest rates, longer life expectancy and the retirement of the baby boomers. As a result, Ontario taxpayers will be on the hook for upwards of $100 billion in unfunded liabilities for public servant pensions. This ticking time-bomb – this pension ponzi – has come about because government promised benefits, but never put aside the money to pay for them.

Government can’t pay for a pension for everyone, but it can do more to encourage private sector businesses to offer pensions to their workers that are portable, affordable and available in far more workplaces.

We know many Ontario small businesses can’t afford to operate a pension plan on their own. A promising option is the federal government’s effort to create pooled pension plans that are open to all workers. The Pooled Registered Pension Plan (PRPP) is a defined contribution pension program offered by third party financial institutions such as banks and insurance companies. The company offering the PRPP combines pensions from various workplaces into a plan and invests money for employees as a company pension plan would.

Bottom line, we can’t continue to ignore fiscal realities while supporting a pension system that is inherently unfair. There must be a system that is equally fair to public sector workers, private sector workers and to taxpayers.

Two-tier pensions create two classes of retirees. In these uncertain times, government must address this elephant in the room and try to do a better job to help ensure financial security and peace of mind for all citizens, not just a select few.