Newspaper article The Canadian Press

Editorial Exchange: Changes Ahead for Pension Plans

Newspaper article The Canadian Press

Editorial Exchange: Changes Ahead for Pension Plans

Article excerpt

Editorial Exchange: Changes ahead for pension plans

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An editorial from the Winnipeg Free Press, published Sept. :

Pensions were central issues for Canada Post and for General Motors Canada in their labour negotiations this summer. Both employers wanted to provide defined contribution pensions for the workers they hire from now on, in place of the defined benefit plans provided for the earlier generation of workers. These two labour disputes and their results show how Canada's pension landscape is evolving.

The post office, a Crown corporation, backed away from its demand to switch to a defined contribution plan. The employer concluded a labour contract for two years instead of the usual four years. This defers for two years the showdown over pension curtailment. General Motors, however, stuck to its guns: Unifor, the autoworkers union, backed off and agreed to new pension packages for newly hired workers.

Canadians are being divided more and more sharply between those who work for the government, including teachers, whose pension benefits are guaranteed by their employers, and those who don't, who must be successful investors in order to enjoy a good income in their retirement years.

In a defined benefit plan, the employees contribute to the plan out of their paycheques and the employer promises a stated level of benefits after retirement. If the pension fund is not large enough to cover the benefits when the time comes, the employer makes up the difference. In a defined contribution plan, the employer makes no promise about the level of benefits. The employees assume the risk of poor investment returns. The employer is spared the expense of covering a pension plan deficit. Employers who lack the power to impose taxes prefer defined contribution plans.

The automobile workers have long been trendsetters in the Canadian labour market, winning job security provisions, fringe benefits and pay rates that were copied bit by bit in other branches of industry. …

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