Pension Ponzi: How Public Sector Unions are Bankrupting Canada's Health Care, Education and Your Retirement

Une chance, il y a encore des journalistes courageux (souvent à l'extérieur du Québec) pour démontrer que les retraites dorées accordées au secteur public sont une iniquité inacceptable de distribution de richesse.

Il est temps de remédier à cette situation.

De plus, on n'aura pas le choix, car il va être de plus en plus difficile à atteindre un équilibre budgétaire, si l'on ne corrige pas nos déficits structurels, et ces retraites insoutenables économiquement n’aident pas la situation.

Prenez, l’exemple de Montréal qui doit régulièrement augmenter les taxes pour compenser les pertes actuarielles, pour les provinces et le Canada on les camoufle en augmentant la dette.

Mais on ne pourra pas continuellement emprunter, de plus, MME les jeunes fonctionnaires, vous être en train de vous faire arnaquer, car vous ne payez pas pour vous, mais pour tous ceux qui n'ont pas assez payé.

Extrait de: Canada urged to end ‘pension apartheid’ Jonathan Chevreau, Financial Post,  Oct 28, 2011

Every Canadian needs $2-million in RRSP contribution room to achieve parity with public-sector defined benefit pension plans, the C.D. Howe Institute says.

As things stand, the system punishes those with defined-contribution pensions in the private sector and those who rely on what little RRSP room is granted them, says James Pierlot, principal with Toronto-based Pierlot Pension Law.

The $2-million figure comes from the value of public-sector DB plans for top managers earning $150,000 late in their careers. Rather than limit RRSP contributions to 18% of a prior year’s earned income, Mr. Pierlot would give every Canadian the lifetime RRSP contribution room, adjusted to inflation.

The need to redress the gap between pension “haves and have nots” has become urgent, Mr. Pierlot says. Indeed, a new book published by Wiley Canada – Pension Ponzi – makes the same point: It depicts a system of

“pension apartheid” that favours 20% of workers with union negotiated public-sector DB plans at the expense of the rest who guarantee those pensions through their future taxes.

Most penalized are new Canadians, the self-employed, the chronically unemployed and those who have suffered market losses in RRSPs or prematurely withdrawn funds from them.

In an interview, Mr. Pierlot said his paper (titled Legal for Life) still calls for upfront tax deductions for RRSP contributions but no annual contribution limit. The only constraint would be coming up with the money. Plans would still be taxable once funds are withdrawn in retirement.

Eventually, registered retirement income funds (RRIFs) would decline to zero but would not be subjected to minimum annual withdrawal rules that may force seniors to sell at market bottoms.

An early draft advocated a “declining limit system.” So while the limit might fall from $2-million to $1.9-million the first year of a RRIF, and fall another $100,000 each year thereafter, someone with only $500,000 wouldn’t be forced to withdraw anything in the early years of a RRIF.

The paper does not discuss taxfree savings accounts, but Mr. Pierlot advocates a lifetime TFSA limit of $250,000 to $500,000. “The retirement system is intended for middleclass workers earning $50,000 to $150,000 a year,” he said, “Anyone earning less should not be in RRSPs but in TFSAs.”

His proposals were included in private-member’s bill C574, which passed first and second readings until the federal election intervened. The Retirement Income Bill of Rights was presented by Liberal pension critic Judy Sgro and supported by all parties except the Conservatives, Mr. Pierlot said.

“It said every Canadian shall have equal opportunity to accumulate pension income no matter how they are employed or where they were born. If it had passed, it would have forced changes to the Income Tax Act.”

Mr. Pierlot said he didn’t “cost” his ideas because Ottawa misrepresents RRSP and pension tax deductions as tax expenditures.

“They’re not,” he says. “Money goes into plans and accumulates tax-free but down the road, the government gets its tax with interest. Yes, it affects government cash flow in the short term, but it isn’t a tax-avoidance mechanism. It’s a tax deferral.”

Fred Vettese, chief actuary with Toronto-based Morneau Shepell, says Canadians “essentially have a lifetime limit already since unused RRSP contribution room can be carried forward indefinitely.”

But it’s true average private-sector workers with RRSPs can’t replicate public-sector levels of retirement income.

“If we truly felt public-sector plans provide an appropriate level of retirement income, the author is right in suggesting a $2-million lifetime limit to level the playing field.”

But there would still be inequity, Mr. Vettese said, because contribution rates needed to generate so much income would impoverish average RRSP savers over a working lifetime.

Pension Ponzi: How Public Sector Unions are Bankrupting Canada's Health Care, Education and Your Retirement


The vast majority of Canadians are blissfully unaware that every man, woman and child in Canada now owes a $35,000 share of government debt and must pay this back, with interest!  Make no mistake, this debt will change our country and affect every single Canadian in the decades to come. You may think you have planned for your retirement and are safe, but the government must find a way to recover this borrowed money, and they can only do that by raising your taxes and reducing your hard-earned benefits. How did this debt come about, and why can't we simply pay it off?

Pension Ponzi lays the blame squarely at the feet of the politicians who refused to stand up to Canada's public sector unions. The fact is Canada's public sector, which accounts for 20% of the workforce, has been grossly overpaid relative to their counterparts in the private sector with cushy pensions paid for with your taxes and new debt.  There is no denying that the country does not have the financial resources to ensure that the next generation of Canadians will have the same standard of living as the ones before it-or to support our growing seniors population. Meeting our public sector pension obligations will break the current social safety net that is a pillar of the Canadian way. 

Can you escape this bleak future? Can you afford to live longer? Nationally-recognized pension expert Bill Tufts and award-winning journalist Lee Fairbanks explore how this catastrophe came about and then suggest ways that government can fix what's broken, and how you as an individual can protect yourself from the financial calamity that is about to engulf Canada.