Home » News

Interior Banner

Funding Retirement Expensive

Funding retirement is expensive and it will get more expensive, says Jim Keohane, president and chief executive officer of the Healthcare of Ontario Pension Plans. And, as baby boomers move into retirement, "we as society will have to pay for it. We can do it now or later," he told the 'Public Sector: What's sustainable? What's negotiable?' at the Lancaster House '1st Annual Pension Conference.’ The pension problem is in the private sector where 11 million workers are not covered and employers are moving from defined benefit pension plans to defined contribution plans. "If we don't deal with it today, it will cost us dearly,” he said, “as a large share of these workers will end up on social assistance." In fact, he said Old Age Security and the Guaranteed Income Supplement are among the fastest growing areas of government spending. Evan Howard, director of policy at the CAAT Pension Plan, said plans need to be made sustainable and what makes them sustainable is good governance. This is achieved by having a governance model where all the levers are in one place and "where you can manage risk to meet promised benefits.” Eileen Mercier, chair of the Ontario Teachers' Pension Plan, said one of the issues is plan balance. In the Teachers' plan, younger teachers are being forced to cover the benefits of retirees who are living longer than ever. So while they have been successful in the investing world, longevity means much of these returns are required to fund the benefit promise to those retired or near retirement and there is nothing they can do because the laws of Ontario prohibit reducing retiree benefits. This means it bears a level of risk that is higher than in other sectors where younger people are coming in and there is a balance, Teachers' doesn't see this balance happening soon because it is also taking younger teachers longer to become full-time. Mike Grimaldi, a representative of the Ontario Public Service Employees Union, said joint sponsorship also helps sustain pension plans. It means real discussions can take place about a plan and its contribution levels instead of having this "thrust on you" as happened in New Brunswick. He said that province's shared risk plans are actually risk transfer plans which move the risk to the plan members. However, all jointly sponsored public plans are shared risk as if funding levels are lower because of lower investment returns, then they have to raise contributions or lower benefits.

Courtesy of Benefits and Pensions Monitor website News Alerts

Back to < News

Email Page Printer Friendly