Wednesday, October 22nd9.5°C
23840
22916

Public pension plans at risk over longer life spans, says auditor general

OTTAWA - The auditor general says Canada's public pension plans could pose a significant threat to the government's financial footing because little attention is being paid to looming risks such as the longer life spans of beneficiaries.

In his spring report, Michael Ferguson warned that prolonged low interest rates and lower-than-expected returns on assets could cost taxpayers billions down the road.

He recommended that public pensions should be evaluated periodically and undergo any necessary changes to ensure their sustainability.

"Although we found that the entities we audited have carried out their responsibilities under the law, no one is responsible for carrying out a regular and systematic assessment of whether government of Canada pension plans are sustainable over the long term," Ferguson said Tuesday.

"Pension plans are operating now in an environment where interest rates are low, and plan members are living longer. It is therefore important that public sector pension plans be designed and managed in a way that considers not just present circumstances, but also protects the interests of current and future employees and taxpayers."

The report examined the three main pension plans representing 95 per cent of the government's pension liability: the public service, Canadian Forces and RCMP.

His office projected that the employer's share of the pension benefits expense for these three plans could climb from 1.2 per cent (or $3.3 billion) of total program expenses in 2017 to 1.6 per cent ($13.5 billion) in 2050.

The report warned the financial burden of these plans could deliver a significant blow to the public purse.

Some signs of the financial strain have already begun to surface, the study revealed.

The findings say that plans experienced funding deficits totalling $6.5 billion over the last three years. To help close the gap, special payments amounting to $741 million in 2013, and around $1 billion over the last two years , were necessary.

The report also said the plan sponsor did not follow "good practices" in its governance, prompting the auditor general to recommend the pension funds review their approaches to make sure they address current and future conditions.

Looking at the long-term risks, the auditor general said Canadians, on average, are working fewer years, retiring earlier and already living longer than was expected only a few years ago.

Ferguson also said pensions plans were battered in the aftermath of the 2008 financial crisis by strong volatility and the extended period of rock-bottom interest rates.

The findings of the spring report were released as Ottawa promotes a new option for pension plans, one that would allow the federal government to avoid expanding the Canada Pension Plan.

The federal government has touted the voluntary target-benefit plan, also known as a shared-risk plan, as a middle ground between defined-benefit plans and defined-contribution plans. Target-benefit plans could be adopted in Crown corporations, it said.

Last year, the federal government enacted changes to phase in hikes to public-sector employee pension contributions so they equal that of the employer. The adjustments also increased the minimum retirement age for new employees.

A report released last month by the C.D. Howe Institute think-tank, however, concluded that federal workers are still far ahead of their private-sector counterparts when it comes to their pensions benefits.

The paper found that recent changes to public pensions had not gone far enough to even the playing field.

Follow @AndyBlatchford on Twitter

The Canadian Press


Read more Business News




Recent Trending




Today's Market
S&P TSX14312.07-235.64
S&P CDNX808.00-14.28
DJIA16461.32-153.49
Nasdaq4382.847-36.632
S&P 5001927.11-14.17
CDN Dollar0.8889-0.0006
Gold1243.00-2.50
Oil79.94-0.19
Lumber330.40+1.70
Natural Gas3.658-0.001

 
Okanagan Companies
Pacific Safety0.12+0.02
Knighthawk0.01-0.005
QHR Technologies Inc1.15-0.02
Cantex0.055-0.025
Anavex Life Sciences0.198+0.006
Metalex Ventures0.05+0.005
Russel Metals32.53-0.56
Copper Mountain Mining2.10-0.07
Colorado Resources0.145-0.005
ReliaBrand Inc0.013+0.001
Sunrise Resources Ltd0.05-0.01
Mission Ready Services0.405-0.055

 



23015

FEATURED Property
1818890259 - 2001 Hwy 97
3 bedrooms 1 baths
$89,900
more details
image2image2image2
Click here to feature your property
Please wait... loading


Keep it rubber side down

This time of year, I always worry about which friends of mine will get caught going off the road in adverse weather conditions. With a little preparation most accidents can be avoided. Having won the...


Big bank predicts rate hike

Photo: Thinkstock.comThe end of record-low rates is nigh, according to one major bank, which has taken a stance and predicted when the Bank of Canada will raise its long-standing overnight rate. &ldq...


Experts share strategies in Kelowna

The third week in October is “Small Business Week”, a week dedicated to supporting local, small businesses. The week was designed to bring awareness to Canadians about the role small busin...

_








Member of BC Press Council


22786