Pension tension

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A lot of the disagreement between the postal worker’s union and Canada Post is over changes to the pension plan. Canada Post wants to switch new hires to a defined contribution plan, where payouts are not guaranteed. Current members get the defined benefit plan which guarantees a fixed income after retirement, regardless of investment returns.

While 2 out of 10 private sector employees have a workplace pension 9 out 10 public sector workers do. With recent labour disruptions private sector employees have shown frustration. Business expert Marvin Ryder suggests it has created an us versus them mentality between the haves and the have nots.

For the majority of Canadians, workplace pension plans are unheard of. Only 30% of employees across the country have a pension separate from CPP and that number is going down every year. The pensions themselves break down two ways:

The defined benefit plan is to provide members with a set retirement income, sometimes referred to as the gold plated pension. The other, the defined contribution plan helps employees build up retirement savings during their career, shifting the investment risk to the employees. They have to manage their own money. The defined benefit plan can be difficult for small businesses to afford its extremely costly. While this plan is growing in the public sector it’s on a steady decline in the private sector.

70% of all defined benefit plans are held by government workers. That’s why Marvin Ryder from the DeGroote School of Business believes the pension issue will continue to boil up, creating an “us versus them” scenario.

“Many people in the private sector are showing us through strikes or labour disruptions that they are a little tired of the public sector whining.”

Ryder says once upon a time, if you worked in the private sector you made more money than civil servants, but times have changed. So for the vast majority of private sector workers, the responsibility rests on their shoulders to make sure they save enough for retirement.