Defined benefit pension plans give retirees a leg up, CFIB says

Businesses call for elimination of early retirement, CPP increases

Public sector employees will be able to retire much more comfortably than their private sector counterparts, a report from the Canadian Federation of Independent Business has revealed.

An announcement from the CFIB on Sept. 12 said Canadians are facing a pension gap that strongly favours those funded by the public, or a defined benefit (DB) plan. Comparatively, the majority of private sector workers who are part of a defined contribution (DC) plan (in which both the employer and employee make contributions to a pension fund), will be strapped for cash.

According to Canada’s Two-tier Retirement, two workers (one in the public sector and the other in the private sector) starting at the same time and making the same pension contributions will have very different post-work lives. If both retired at age 65 after working for 35 years, the private sector employee will have earned $605,000, while the public sector employee’s retirement fund will amount to $1.38 million.

Dan Kelly, president of the CFIB, said something must be done to level the playing field between those DB plans and DC plans.

“As big as the gap may seem, we are comparing two workers who do have workplace pension arrangements,” he said. “It makes you wonder what that gap really is for the millions of Canadians in the private sector that have no workplace pension plan at all. How do they feel about their taxes paying for the gold-plated retirement of civil servants?”

The report recommends eliminating early retirement programs, rejecting Canada Pension Plan (CPP) increases, and improving options for those who do not have pension plans at their workplace, such as a Pooled Registered Pension Plan (PRPP).

About 80 per cent of Canadians are employed in the private sector, while the other 20 per cent work in the public sector.

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