N.Brunswick introducing flexible pension returns

http://www.theglobeandmail.com/commentary/new-brunswick-tackles-its-pension-pickle/article4226014/

A big fixed lump in the budget of a public institution for pensions will grow in size – in and of itself – and will eat up a greater share of the budget tomorrow compared to today. Something has to give.


(D - but this time, somebody started thinking 'outside the box'. )

Impressively, the government worked out a new model for itself and will see unions adopt it, too, including the New Brunswick Nurses’ Union, the New Brunswick Council of Hospital Unions and the New Brunswick Pipe Trades.

The model, apparently based on one used in the Netherlands, emerged from a task force of pension experts that understood New Brunswick needed a new way of doing things. The old model was based on premises no longer valid: high interest rates, more or less constant stock market growth, shorter lives. Pension plans designed on those assumptions now find they cannot deliver. Or, in order to deliver, governments have to step into the void.

So, rather than raid the treasury or keep promising what might not be delivered, New Brunswick has adopted a shared-risk pension plan that protects pensions and retirement age today but over time will increase contributions and raise pensionable age for younger employees.

Basic pension benefits will be almost completely funded, but extra benefits such as a cost-of-living allowance will depend on circumstances. 

Experts who worked through many iterations of this model suggest that a 97.5-per-cent probability exists that the basic pension benefits will never be reduced and that the average indexation for extra benefits will be at least 75 per cent of the consumer price index. All one can say is that we shall see.


Retirement is going to be delayed, especially for new employees. Their contribution rates will almost certainly rise as well. But the chances of the plan collapsing are almost nil.


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D- the main problem with this sensible and balanced approach for CPP is that the Boomers would need to share the pain. And the starting point for their position can be summarized from "Oliver Twist" - 'more for us and NONE for you!'.


Any proposal that involves ANY loss to CPP payout for the next 20 years is DOA. Unless the younger adults (and still-youths of Gen Zed) fight for it. They cannot, you say? Bull. Look at Quebec. The students have brought a complacent Charest administration to its knees. Think about that!