Public pensions are more stable than we think


“Pension funds are wildly unsustainable,” says the Toronto Sun.

The National Post stated there is a “problem of unaffordable public pensions.”

When you listen to conservatives talk about pensions, it sounds like the whole pension system that has provided retirement security for millions of Canadians for nearly 50 years is suddenly bankrupting the country.

But how bad is the situation? Are our pensions really that unaffordable?

Not according to the Healthcare of Ontario Pension Plan (HOOPP), the organization who looks after pension plans for most of Ontario’s hospital workers. They recently issued a statement saying the pension fund is in good financial shape. In fact, HOOPP has $1.15 for every pension dollar it spends. It also posted a 10% growth rate over the past 10 years. That means nearly 300,000 hospital workers have enough money invested in HOOPP to retire comfortably.

Contrary to what right-wing pundits are saying, public run pension plans are in good financial shape and they provide better retirement security than most private sector plans.

Sometimes people get angry about how strong public sector pensions are. But instead of attacking public sector workers, they should begin demanding private employers to provide the same type of pensions.

76% of private sector employees don’t have a pension. Half of the employees in the private sector who have a pension have defined contribution plans. So if an employee contributes 5% of their incomes into an RRSP, the employer will match that amount. But these plans are much more unpredictable and generally don’t provide much money to retire. Sometimes employers will only match a maximum 1% contribution. 1% from the average annual Canadian salary, which is $38,700 a year, is not enough to retire on.

Big funds like HOOPP bring financial expertise to manage these funds properly. They also lack a “for-profit” motive, which keeps fees low and returns high. They are also more able to handle market fluctuations than an individual’s personal RRSP.

It’s time for the private sector to step up to the plate and begin providing their employees with pensions. They have done it in the past and there is no financial reason why they can’t do this today.

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