Don’t expect any guarantees in pension reforms

Ottawa did not promise a guarantee fund in the pension-reform package announced this week. Such a promise might only have made matters worse.Instead, the measures unveiled by federal Finance Minister Jim Flaherty would inch companies that are under federal watch toward making their promise to employees of a future income in retirement more storm-proof, more reliable.

Ottawa will block banks, airlines, railways, telecommunications and other federally regulated companies from taking contribution holidays when their pension plans are less than 105 per cent funded.

It will block those companies from improving benefit promises when their plans are less than 85 per cent funded.

It will require the companies to top up within five years the plans they deliberately terminate, without the company going out of business, as the provinces already require.

Other countries have pension guarantee funds that cover employees of bankrupt companies.

Ontario also has a guarantee fund, such as it is. But the Pension Benefits Guarantee Fund (PBGF) also has no money.

So, in the last provincial budget, the government emphasized it has no obligation to make up the shortfall or extend loans as it has in the past.

The pension issue is front and center for most Canadians. If you belong to a defined benifit program you really want to understand the health of your plan and if it is a signifigant portion of your retirement wealth you may want to take proactive action. 

It does little good after the fact, ask any Nortel pensioner who are faced with tough decisions at this point in time. Read more.

This entry was posted on 31. October 2009 at 14:45 and is filed under Retirement. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response or trackback from your own site.