Labour Day Reality Check

By August 30, 2014Business, Business News

Stealth Pension Bailouts Costing Taxpayers a Fortune
New StatsCan data shows 169% increase in cost to taxpayers for bureaucrat pensions

By Gregory Thomas, Federal Director, Canadian Taxpayers Federation. With Labour Day just around the corner, the Canadian Taxpayers Federation (CTF) released new numbers today on “stealth bailouts” for government employee pension plans.

Virtually every government employee pension plan in Canada hit troubled waters over the past decade, but rather than reform the plans or bail out these plans with large cheque presentations, governments have been quietly increasing taxpayer contributions, creating a “stealth bailout.”

According to Statistics Canada data, governments in Canada put $6.7 billion into government employee pension plans back in 2002. By 2012, that expense had skyrocketed to $18.1 billion; a 169 per cent increase. The CTF calculated the cost per employee at $2,676 in 2002 and $5,741 by 2012; an increase of 115 per cent. These calculations do not include special back payments made by governments.

“It’s not fair for everyday Canadians to have to keep bailing out government employee pension plans,” said CTF Federal Director Gregory Thomas. “Politicians should have reformed these expensive and unstable government employee pension plans years ago. It’s time to act.”

Pension Contributions by Governments in Canada
pension contributions

Sources: Cansim Tables 280-0026 and 280-0008. Government contributions do not include back payments, only annual contributions that are based on rising rates.

The CTF has called on politicians to do three things:

1) Lead by example: Convert politicians’ own costly defined-benefit pensions into less costly defined-contribution plans. (Note: provincial politicians in Saskatchewan already did this over a decade ago)

2) Stop the bleeding: Just as Saskatchewan’s NDP government did in the late 1970s, begin putting new employees into less risky defined-contribution plans; this type of plan protects taxpayers from bailouts.

3) Make do like everyone else: introduce “targeted-benefit” clauses for existing plans. This requires the plans to pay out what they can afford rather than a fixed formula approach.

The CTF has released two YouTube clips to explain these bailouts to the public – click here and here to view them.

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