The first public pension was organized in Germany way back in 1889. It is said that Kaiser Wilhelm had the actuaries calculate the average life expectancy of German citizens, which turned out to be 65, and then he set that as the age when people could start collecting pensions. The expectation was, of course, that very few would live to collect it. That kind of cynicism is prevalent when we look at the subject of pensions and the elderly. Despite the manufactured soft focus picture of “the golden years” we condemn many of our senior citizens, especially women, to poverty.
At a time when most people agree that Canada Pension Plan (CCP) benefits are inadequate, the Harper Government, in step with other neo-liberal governments, is cutting back pensions. At a time when many workers don’t have a pension or have one that is poorly funded and poorly managed, workers with decent pensions are being subject to attacks by highly profitable corporations and their allies in the media. Nortel, the airlines, and any number of companies in the past 20 years, have abandoned their contracts with employees. Governments in New Brunswick and Quebec have used their legislative powers to escape their responsibilities as employers. This is a significant part of the larger abandonment of the social contract between government and citizens.
Pensions are in reality deferred wages. Unionized workers, when voting on their negotiated contract, decide on their priorities, including whether to go for an increase in wages, more vacation time, or better benefits when they retire. Over their years in the workplace, they contribute into the pension fund. Those funds are matched by the employer. Somewhere around age 55 to 65, they retire and receive a pension.
There are basically two types of plans. A defined benefit (DB) plan means that you know what your benefits will be, based on years of service and the amount of your contributions. That was the goal for most workers, and until the last decade, this type of plan was being negotiated in more and more workplaces.
The other type of plan is a defined contribution (DC) plan where the only thing you know is how much you are contributing but you have no idea what you will receive when you do retire, thus making the future even less secure. This is the preferred plan of too many employers because it means they do not have to carry the liability for future pensions. There is no risk. If the pension managers invest badly or we have a repeat of the 2008 crash, the retirees receive lower benefits. As pension analyst James Pierlot stated “ If you’re in a defined contributions plan chances are you’re not going to have an adequate retirement income. You think you have a pension plan and you don’t.”
There have been a number of bitter labour disputes in the last few years as corporations such as Vale, Air Canada, Bombardier and Canada Post have tried to force workers to switch from a DB plan to a DC plan. In Quebec, where police and firefighters reacted angrily as the Liberals forced through cuts to municipal pension plans, CBC business columnist Don Pitts commented “To read many of the stories about the Quebec pension cuts you would think it was the pensioners’ fault. Outraged taxpayers inveigh against government employees for sucking money out of the public purse for a cushy retirement. It’s as if by choosing a job with a pension and keeping their side of the contract, the worker is taking advantage.”
One hears a lot of right wing propaganda and untruths: “The Baby Boomer generation is making pensions unsustainable”, “People are living longer”, “I haven’t got a pension so why should she”, “Public sector workers have gold plated pensions”, “It isn’t the government’s responsibility” and the classic “You should have saved more.” These are repeated ad nauseam by the Conservatives and their allies, including the Canadian Taxpayers Association, etc.
The baby boom cycle will end and demographics will balance out. The retiree to worker ratio due to lower birth rates can be adjusted by greater immigration. Yes, people are living longer but that doesn’t mean we stop having livable pensions. We currently have people who only have RRSPs, or only have the CPP, and are trying to calculate if they will outlive their savings. This is a wealthy country. People who have worked their whole lives contributing to society should not have to choose between spending their money on medicine or on food.
There are some short term problems with some plans but the causes are not with the pensioners. Employers are supposed to match the employees’ share but they sometimes declare or are granted a contribution holiday. This happened with a number of plans including Quebec’s. Canada Post, in the late 90’s, took a holiday worth $770 million. Of course the postal workers weren’t granted a contribution holiday. This short sightedness has had a negative effect on the present short term balance.
Another problem is the shift by pension managers from relatively low yield, low risk bonds and real estate investments to equities that may have a higher return when things are booming but suck out all the savings when there is a downturn. It was Brian Mulroney who allowed an increase in the amount that could be invested in the stock market and foreign markets. There is a lot of capital in pension funds and the investment bank CEOs, who never met a Conservative Government they didn’t like, loved the windfall coming their way.
We need to resist the attack on pensions. Instead of directing our anger at a 65 year old teacher or postal worker who, after contributing into a pension fund for 35 years, should be able to sit back and enjoy the last years of her life, let’s stand up for decent pensions for everyone.