Imagine for a moment that you’re sitting on your couch one Wednesday evening watching T.V. and the doorbell rings. Who could it be?Moments later you open the door and a stranger in a suit says“Hello, I’m from the government and I’m here to collect for the pension shortfall.”
“Pension shortfall?”You confusedly ask.“What do you mean?”
“It’s for my pension plan,”responds the well-dressed stranger.“Our government employee plan sure took a big hit in 2008 because of the economic slowdown and in order to make scheduled payments in the future to myself and my colleagues, the government has raised taxes to put more money into our plan.”
“Oh, I know all about 2008,”you tell the stranger.“My spouse and I both have to work a couple more years to make up for the fact our RRSPs lost 20 per cent of their value.”
“I understand,”says the government employee.“But we still need to raise your taxes. Our fund has promised guaranteed pension payments to my colleagues and I and there’s no longer enough cash to make those payments.”“Let me get this straight,”you state rather angrily.“My RRSPs lost a pile of money during the slowdown, but now we have to put in more money into YOUR pension plan because it lost money too?”“That’s correct,”responds the nervous bureaucrat.
“That’s ridiculous!”you exclaim.“Don’t I already contribute to your pension each year through my taxes?”
“That’s correct,”notes the bureaucrat.“Right now, I put in seven per cent of my salary into the fund and the government matches it.”
“You mean we the taxpayers match it, right?”You ask.“And now we have to put in more money to your plan even though I only have RRSPs and no workplace pension. No one matches my RRSP contributions and I’m working longer and having to put in more money so you can retire on schedule?”
“All those statements are correct,” responds the bureaucrat. “Who on earth would agree to such an unfair and expensive system?”you cry out.
“You did. Well, at least the politicians you voted for did,”responds the bureaucrat.With the exception of the bureaucrat actually coming to your door to ask for additional money, the essence of the story above is sadly true.
Statistics Canada data shows 75 per cent of Saskatchewan taxpayers working outside the government have no workplace pension whatsoever. Yet they continue to put in more and more into costly government employee pension plans politicians our politicians have agreed to.
For example, back in 2009, the plan that covers municipal government employees (outside of the major cities) saw employees put in 5.4 per cent of their pay and taxpayers match it.As of January 2013, that rate will be 8.15 per cent for both parties; a 51 per cent increase in pension costs per employee that the taxpayer has to pay for.
While the problem has largely been fixed at the provincial level (most employees hired after the late 1970s are in a less costly “defined contribution” plan), municipal and federal employee pension plans are still in costly “defined benefit” pension plans.
The only way to keep the government from digging into your wallet (and that bureaucrat off your front porch) is if we reform government employee pension plans across the entire province. What is your politician doing about the problem?
Colin Craig is the Prairie Director for the Canadian Taxpayers Federation
