Public sector poised to be privileged retirees

With almost half of working Canadians facing retirement without an organized pension plan, or a self-managed retirement savings plan of any significance, Canada is facing a two-tiered situation for retirees — them that has, and them that don’t.

This startling fact comes from Larry Brown, National Secretary-Treasurer of the National Union of Public and General Employees, in a news release issued two years ago.

Nothing much has changed since then as more and more members of the baby boom generation move into retirement age.

Slightly more than half of all Canadians who are members of a registered administered pension plan work in the public sector.  Most of these — 85 per cent — have what is called defined benefit plans, which provide guaranteed monthly payments for the life of the retiree.

On the other hand, among the rest of those working Canadians in the private sector who have membership in a registered retirement plan, only about 25 per cent are in defined benefit plans.

The rest are in what are called defined contribution plans, which set how much contribution they must make, but their benefits will vary all over the map depending on how successfully the plan administrators work their investments.

After the recent world financial meltdown, you can appreciate how difficult that has been.

So, when Prime Minister Harper says he is looking at changes to the Old Age Security portion of Canada’s retirement safety net — possibly advancing the age of eligibility to 67 — you have to appreciate he is just nibbling around the edges of the problem.

He is trying to minimize the cost of the plan for future taxpayers, but he wouldn’t be doing a damn thing to fix the problem of half the working population not being financially prepared for retirement.

This is not a new problem. It’s been staring us in the face for a decade or two.

Anyone with a simple calculator and access to census data could see the inevitability of baby boomers putting an enormous load on the OAS plan and the Guaranteed Income Supplement.

Couple that with the fact that readily available statistics have been making it clear that a huge number of Canadians have not been putting sufficient savings aside for retirement.

Recent studies have shown that a lot of working families have been having trouble getting by month-to-month and are often only able to try to set aside something for their children’s education.

That hasn’t left much, if any, for retirement savings.

Half the population faces this situation.

I don’t think it’s going to be very pretty in a few years’ time when those who don’t have a pension are getting by working at Wal-Mart, and looking around them at some of the customers they serve who have guaranteed government pensions.

I think we have created a privileged class, and it’s mostly those in the public sector.

The rest of the population can be forgiven if they grumble about having to continue paying taxes to support a privileged minority.

Patrick Hrushowy writes every Friday in the News Leader Pictorial. Email him at phrushowy@shaw.ca