Canada’s auditor general has expressed concern over the financial burden of public pension plans, highlighting risks such as the longer life spans of Canadians.
In a spring report, released Tuesday, Michael Ferguson recommended that public pensions – specifically the public service, Canadian Forces and RCMP, which make up 95 per cent of the government's pension liability – be reviewed periodically and necessary changes made to lessen the financial blow.
Ferguson’s office predicts that the employer's share of the pension benefits expense these three plans could increase 1.2 per cent to $3.3 billion of the total program expenses in 2017 to 1.6 per cent ($13.5 billion) in 2050.
“Pension plans are operating now in an environment where interest rates are low, and plan members are living longer. It is therefore important that public sector pension plans be designed and managed in a way that considers not just present circumstances, but also protects the interests of current and future employees and taxpayers,” he said Tuesday, according to the Canadian Press.
The report identified signs of financial strain including pension funding deficits of $6.5 billion over the last three years, which led to special payments of $741 million in 2013, and about $1 billion in total over the last two years.
Ferguson touted long-term risks as Canadians working fewer years, retiring earlier and living longer than was expected just a few years ago. He said that changes to pension plans, which took a beating after the 2008 financial crisis, have not gone far enough.
These changes include increases to public-sector employee pension contributions to equal that of employers and increasing the minimum retirement age for new employees.
The federal government is promoting a new option for pensions plans called the voluntary target-benefit plan or shared-risk plan – which it hopes will act as a middle ground between the defined-benefit plans and defined-contribution plans, while preventing the expansion of the Canada Pension Plan.
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