Tag Archives: public pension reform

Facing up to the pension challenge

In the unlikely event that New Brunswickers, en masse, get busy and jump start another baby boom to someday repopulate the ranks of the provincial civil service, we might just avoid the fiscal crisis that now looms over public pensions.

The sad truth is, though, the $1 billion in unfunded liability will not vanish so appealingly. No fancies of the imagination, no wishful thinking, no sleights of the accountant’s hand will make it go away. Someone’s going to have to pay for it. The debate that roils now is solely about who.

Will it be, to some extent, those who paid faithfully into the fund for decades –  presuming that they would receive, upon their retirement, a predictable amount on which to survive their sunset years? Or will it be, to a much larger extent, those who are still working – many in the public sector; many more in the private sector where taxes must, by necessity, cover the pension shortfall.

Such is New Brunswick’s “Sophie’s Choice”.

The David Alward government has never been clearer about its stand on any matter of public policy than it has on this one. It wants to move to a shared-risk approach, modeled after some European systems, in which pensioners assume some of the hazards of their variably performing investments directly. Gone, then, would be the traditional and fixed guarantees, including yearly CPI indexing.

In a letter to the New Brunswick Pension Coalition (obtained earlier this week by the Telegraph-Journal), provincial Finance Minister Blaine Higgs said the status quo is unacceptable. So are the quick fixes contemplated to postpone the inevitable. “It would be impossible for the province to consider ‘Band-Aid‘ solutions,” he wrote. “Nor could we accept changes to the proposed model which would be unfair to our current and future employees or to New Brunswick taxpayers.”

It is around this issue of fairness than members of the Coalition also rally. Is it fair, they ask, for the provincial government to unilaterally claw back pension guarantees? Is it fair to force a retiree, with few economic options available to him, to accept a level of risk shrouding his income he was never led to expect until now? When, in essence, is breaking a deal ever fair?

Who’s right? In a way, everyone is. Still, and lamentably, for the current cohort of pensioners, there is no moral equivalency between these opposed positions. The ground on which the government stands is higher if only because most people in the province do not enjoy the arrangements at issue. Absent any reform, they would, however, have to pay for them.


The disputants may blame each other until all the clauses in the Public Service Superannuation Act sunset. But the real enemy is demographics. And the cold, if somewhat comforting, fact is New Brunswick is not alone.

Just about everywhere in Canada, public pensions are in trouble. They were crafted at a time in the nation’s history when the future looked much more munificent than it does today. The pay-it-forward model – in which the existing generation of public workers essentially contributes to the retirement well being of future ones as it relies on the beneficence of past ones – is, for all practical purposes, broken.

Today, the population is increasingly geriatric and that – according to public policy experts William Robson and Alexandre Laurin, writing in the Globe and Mail this week – means “there are fewer active employees to support the pensions of retired beneficiaries. People are living longer, which means pensions need to be paid out for longer periods.”

In fact, as they discuss pension reforms underway in Alberta, they single out New Brunswick’s proposed changes as “ambitious” and “far-reaching,” suggesting that the “new shared-risk model. . .protects future generations by permitting reductions of base benefits already accrued, in extreme situations.”

For most New Brunswickers, the choice, though unhappy, is clear. In the interests of fairness, and for the sake of what’s left of the system, pension reform is necessary.

In fact, wishful thinking to the contrary, it’s unavoidable.

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