Canadians have been conditioned to believe that headlines in the media are the important news, but often that is untrue. Part of my value to you is to present the really impactful truths that are underreported.
If you remember in January 2014, I wrote about the potential problems with pension benefits, titled The Chocolate Santa, a Benefit with a Hollow Centre. Some jurisdictions in the US have had to choose between turning on the street lights or scaling back retirees’ benefits. Or seeing the company go bankrupt or reducing pension payments. Imagine being a senior citizen whose will lose a third to a half of your pension benefit. How would you feel?
Don’t look now but that scenario could play out in Canada.
Bill C 27 was introduced very quietly in Parliament. I had a read through it and was disturbed. I wish they would write plain English. It proposes to decrease the legal obligation of federally regulated employers to provide pension benefits, for future, present and past employees.
Defined benefit plans as I mentioned before are very expensive. This is the topic that led to the latest Canada Post threat of job action and lockout. Employers prefer defined contribution plans where the employee assumes the investment risk. Now further, target date plans are being proposed. Even worse for employees close to retirement, the legislation proposes that employers be allowed to substitute an annuity for the pension benefit. The employer has thus relieved themselves of the majority of the responsibility for the future of the retiree.
Canadians need to do more than hope this doesn’t become law. MPs, the Minister of Finance, and the Prime Minister need to know Canadians are displeased. There should be no complacency here, because already 1 province has taken steps to reduce pension obligations of employers. New Brunswick is experiencing class action lawsuits and constitutional challenges because of its legislation. Alberta and BC have started introducing target benefit pension plans.
I mentioned before that anyone under 45 should not assume if they have a pension plan that it will automatically be a part of their retirement plan. Even older workers who lose their job should seriously consider choosing the option of a Locked In Retirement Account(LIRA), as some of my clients have wisely done.Then it is YOUR money and not just a future promise on a piece of paper.
One very important factor in reaching financial success is control over your investments. As we work together you will achieve your goals. A piece of paper that makes a promise for the future might now become something you won’t be taking to the bank.