Pension reform: New Brunswick is a leader

Telegraph Journal

COMMENTARY

HON. BLAINE HIGGS

Currently, taxpayers pay $2.50 for every dollar put in by employees. This is neither fair nor appropriate when one considers that an estimated 60 per cent of New Brunswickers have no pension.

I was surprised to see New Brunswick Pension Coalition member Michael MacBride`s recent column asserting that the PSSA pension fund is in “good shape.” This is certainly at odds with the statements made by the pension coalition’s own actuary who was provided with all the information he required and agreed with the province’s assessment that the deficit for the fund is in the billion dollar range. I do not think many New Brunswickers would conclude a billion-dollar deficit on a $5 billion fund would indicate it is in “good shape.”

It is important to set the record straight on a number of the claims made in Mr. Macbride’s commentary, including the assertion that employees have contributed three times as much as the Province into the Public Service Superannuation Act Pension Fund. This is an inaccuracy that has been corrected publicly numerous times. Since the inception of the PSSA in 1932, employee contributions have totalled $1.5 billion, while taxpayer contributions have been $2.5 billion. Even if you factor in interest earned on the early employee contributions going back to 1932, not only have taxpayers paid more, it is not even close.

The unavoidable fact is that the PSSA was fully funded in 2000-01. This means that any funding shortfalls from the past had been made up. Mr. MacBride says that pension changes must be “fair and appropriate.” Currently, taxpayers pay $2.50 for every dollar put in by employees. This is neither fair nor appropriate when one considers that an estimated 60 per cent of New Brunswickers have no pension.

He also says that pension reform should be “well-balanced.” I agree, but how well-balanced would pension reform be if retirees were not part of the solution and the entire burden of reform was placed on our current employees, taxpayers and the next generation?

Mr. MacBride states that the credit agency Standard and Poors has said that New Brunswick has a “moderate pension liability” suggesting that our pension reforms are unnecessary. Should we wait until the pension liability is “critical” before we take action? Our government would say no, and that by making changes now, we can avoid much more drastic action down the road that could impact all members more severely.

It is very easy for critics of pension reform to blame the necessity of these reforms on what has been done or not done in the distant past, but the reality is, for the pension fund to be secure for retirees as well as current and future employees, it is what the future will bring that matters most.

In almost all the economic scenarios predicted by actuaries, investment returns will not be as strong as they have been and retirements will be longer than was previously expected. This is not unique to New Brunswick, but we have been a leader in terms of our solution to address these problems. Our New Brunswick model has been recognized by sources as diverse as Jim Leech of the Ontario Teacher’s plan, the New York Times editorial board and the Boston College Center for Retirement Research.

I would encourage anyone who wants the facts on pension reform to visit our website at www.gnb.ca.

Blaine Higgs is New Brunswick’s Minister of Finance.

Last Updated (Tuesday, 14 January 2014 09:52)

 

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