A Dark Cloud on the Pension Security Horizon

JoAnne Hoyak, Pensions Chair and John Sushenitsky, Political Advocacy Chair

It is not raining yet but there are dark clouds gathering over the security of our retired teachers’ pensions. The threat lies in Bill C-27, presently in second reading in the federal House of Commons. The Bill, if passed, would remove the certainty of the defined benefits (DB) approach to pensions to one of uncertainty dependent on the whims of the stock market. This second approach is named the defined contribution (DC) and it is being promoted by companies wishing to reduce the cost of their share to workers’ pensions.

If Bill C-27 is passed into law in its current form it would apply only to federally administered pension plans. It seeks to legally allow the conversion of DB pension agreements to a Target Benefit framework (DC). It will, however, set a precedent for provincial governments to follow if they believe it will save them money.

Remember when banks used to give you a decent return on your savings account. They took our savings and invested it in order to earn a profit for their customers. They took a risk on our behalf. Then, the rules changed. We were told that we would have to invest ourselves and the banks would give us a minimal interest rate just to hold our money in one place. They transferred the risk from themselves to us. Some customers took the risk, others absorbed the loss .

There is a parallel here with moving the DB into a DC scheme. With the Defined Benefits approach,