Public pension plans have received flak over the years, with critics calling for greater transparency around liabilities and fairness for taxpayers.

The Canadian Federation of Independent Businesses launched a campaign back in 2011 to raise awareness about public pensions and their cost to Canadians. According to the CFIB, public servants already earn more every year compared to private sector employees. And then, amid continued discussions about more balanced cost-sharing ratios, the federal government increased the member contributions of three public service plans in January 2017.

But recently, a report by the Washington-based National Conference on Public Employee Retirement Systems challenged several arguments used to discredit public pension funds in the United States. It looked at public pensions’ unique funding model and other factors such as retiree taxes, employee contributions and investment earnings.

Read: Public pensions beneficial to taxpayers: advocacy group

First, the report noted tax revenues from retiree spending and pension investments actually exceed what the public pays into them. Taxpayers only pay about 20 cents on the dollar for pension benefits, while investment earnings and employee contributions generate the remaining 80 cents, according to the report.

It also questioned the notion that public pension plans should be able to cover their long-term liabilities with current revenues. Public plans start with an unfunded liability that declines over time with investment income and ongoing contributions, the report noted.

Finally, the report concluded, using its own past research, that dismantling public pensions would actually be a negative for taxpayers because doing so would lead to income inequality and greater economic volatility.

Read: Top 10 Canadian pension funds help drive economic prosperity: study

Indeed, a 2013 report by the Boston Consulting Group found Canada’s 10 largest public pension funds contribute significantly to national prosperity and provide Canadians with one of the strongest retirement income systems in the world. It found the 10 funds have invested roughly $400 billion in Canada, including $100 billion in real estate, infrastructure and private equity.

The issue is the topic of this week’s online poll. Do you agree with the report’s argument that public pensions are generally positive for society given the long-term wealth they create? Or do the large liabilities governments face from public pensions outweigh the upsides noted in the report? Have your say in this week’s poll.

 

Copyright © 2020 Transcontinental Media G.P. Originally published on benefitscanada.com

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