In 2011, a propaganda war was launched attacking the generous pensions paid to Canadian public sector workers. The attack was initiated by the Canadian Federation of Independent Business (CFIB) in its Pension Tension campaign. The campaign was then further bolstered by the release of the book Pension Ponzi by Bill Tufts and Lee Fairbanks (with a forward by Catherine Swift of the CFIB), and recently joined by the C.D. Howe Institute in its December 2011 paper, “Ottawa’s Pension Gap: The Growing and Under-reported Cost of Federal Employee Pensions.”

This propaganda war, as its core theme, suggests that the pension programs maintained for Canadian public sector employees place the country at risk of a Greece-style economic meltdown. Although there are kernels of truth that serve as foundation for some concerns, there are a number of “big lies” promoted in the propaganda that are worthy of some dispassionate analysis.

The core kernel of truth is that public sector DB pension plans carry financial risks, as all DB programs do for both employers and plan members, and it is important that those risks are prudently and effectively managed. Some of the big lies derived from this kernel are as follows.

Pension liabilities are most appropriately determined using current market bond yields. Consider a pension system that is designed to pay defined benefits at retirement that are based on final average earnings (to a maximum) for a five-year period prior to retirement, and that is fully funded by a set rate of contributions based on the employment earnings of members not yet eligible for a pension. (We could call it the Canada Pension Plan!) Do we need to estimate its liabilities and call it part of the public debt? What purpose would this serve? Of course, it would be prudent to regularly estimate/model future benefit payments and contributions to ensure that the system remains sustainable, but it certainly would be misleading to claim that the capitalized value of CPP pensions that may be paid sometime in the near or distant future represents a current government debt obligation.

There are many ways to estimate the value of future pension obligations, all of which involve making assumptions about the future—which, as many actuaries happily point out, will be wrong. The important point to keep in mind is that they are estimates, and the methods and assumptions used to make them must be appropriate to the purposes of the estimates, which themselves will vary according to stakeholders, their risk exposures and requirements for appropriate disclosure. Standards for estimating pension liabilities in Canada are set by governments in legislation applicable to most (but not all) workplace pension plans, the Canadian Institute of Actuaries and the Canadian Institute of Chartered Accountants, and many plans have to prepare separate estimates using a variety of economic assumptions sets (plus demographic and life contingency assumptions) for the purposes of differing stakeholder groups.

Public sector pensions are “out of control”; taxes will have to increase unless action is taken to reduce benefits. In Canada, there are examples of public sector pension plans that have significant funding challenges that might lead to tax increases, but the big lie is to generalize specific problems to all public sector programs. At the federal level, significant changes were made in 2000 to help the government manage risk exposures to taxpayers, and many provinces have similarly implemented changes to shift risk away from taxpayers over the past 25 years. For example, since 2001, funding of B.C.’s public sector plans (covering workers in provincial, municipal, teaching and college sectors) is based on contribution formulas that are fixed in relation to both pay and cost-sharing between employer and employees, and upward pressure on pension funding requirements can be mitigated at the collective bargaining table. Over the past decade, public sector workers have experienced erosion of their retirement benefits, particularly in relation to non-pension post-retirement benefits that are funded under the same formulas. Other provinces have implemented similar strategies, including Ontario, which reformed most of its plans prior to 1990.

It is true that current pension funding requirements pose significant fiscal challenges for governments. At the federal level and in many provinces, political mandates appear to clearly recognize the principle of minimizing, if not reducing, taxation. However, this may not be quite so apparent at the municipal level, where significant pension funding challenges are most frequently reported on.

Pension “featherbedding” abuse is rampant in the public sector. Pension Ponzi is full of examples of pension featherbedding that benefit senior officials in the public sector. The big lie is that such behaviour is unique to the public sector. I would suggest that public sector transparency requirements, coupled with the political nature of senior public sector appointments, simply make such incidences far more visible than similar behaviour in the private sector in the senior executive class.

The biggest pension issue in Canada is the lack of pension coverage for private sector workers. It is disturbing that some business leaders seem more focused on promoting propaganda that scapegoats public sector workers who benefit from generous pensions, rather than embracing the concept of providing access to pensions, even at a basic level, to all workers.

Copyright © 2019 Transcontinental Media G.P. Originally published on

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Todd Plain:

The point I think that the CFIB is making is valid. I think wages , pension benefits and workloads of public sector workers has to be brought in line with the private sector. We are now at the point where private sector employers and employees are second class citizens in this country. The assumptions that we can make private pensions as equally lucrative is nonsense in todays economy.The real truth is that as the emerging economies continue to make advances at our expense, our quality of life will fall as their’s goes up until we meet and the playing field becomes equal. Private sector business owners and employees cannot be the only ones who take the cutbacks.The next decade will not be one of growth but one of decline where we all will have to learn to do with less. The public sector will have to share the burden or there will be a war.

Friday, January 13 at 5:52 pm | Reply


I agree totally

Saturday, March 11 at 10:53 am

Kelly Morris:

Sorry Greg, I’m unconvinced. Perhaps the best outcome would be to curb public service pensions until such time as those who pay for them, namely the unsubsidized net taxpayers of Canada, realize similar benefits. Your article , for me, did more to reinforce the propoganda than disarm it. I’m alarmed at the earnings gap between public and private sector positions, in addition to the pension/benefits gap. This dynamic cannot continue indefinitely.

Friday, January 13 at 7:29 pm | Reply

Jamie Bonner:

Kelly Morris, contributions to the public sector pension plan are 40% funded by the employee and 60% funded by the employer. Also public sector workers, when they reach the age of 65, have their government pension reduced by the equivalent of the amount they receive in Old Age Security. In essence they pay for two pensions and receive one.
According to Treasury Board figures the average public pension is $25 000 a year. Take away income tax and the pensioner is left with slightly less than $2 000 a month. If you want to be more thorough reduce the OAS and you get even less.
I too am alarmed at the growing gap between public and private pensions, however your anger should be directed at the fat cats at the top of the corporate ladder who are wallowing in the wealth while the average Canadian worker is left with nothing.

Monday, January 16 at 11:20 pm


Kelly, pensions are paid of out payroll deductions. When you get a pension, you agree to have the employer take a portion of your compensation and pay that into a pension plan, which you add to from the remaining taxable income. Taxpayers pay for the services provided by the employees. The employees pay for their pensions from that compensation.
Jamie. Pensions are made up of both funds from their pension plan and CPP, not OAS. Yes, they pay into both CPP and their pension plan and thus fully deserve their pension. Guys like Kelly want the same pension but they don’t want to give up the new boat that they can afford because they are not putting aside 25% or more of their compensation every week.

Tuesday, May 28 at 9:58 pm

Jean White:

It is appropriate to ask for hard facts, however, most in the public don’t have access to hard facts except in Ontario which mandates the release of public servant salaries.

Looking at Ontario securities Commission and other legal salaries compared to those of inhouse legal counsel with similar experience, the public servant salaries are higher in many cases and equally high in others. Is the federal government – that suppports transparency – prepared to mandate salary posting at least in bands? Then I could make an informed decision.

This article also mentions “non-pension post-retirement benefits” — these virtually don’t exist in the private sector in any material way.

A discussion of whether to bring government benefits down to those of “ordinary” Canadians or those of all Canadians up is not going to lead to agreement (the ideal is to bring everyone up but who pays – today’s generations or the enxt one?), however, we should all be ready to discuss sharing the costs of what is important to us. Lobbing criticisms at big business and people that work for these businesses isn’t going to solve the problem and it is fair that everyone be asked to play his or her role.

I, as a taxpayer and a consumer, have to pay for the high cost of unionized labour when I buy a car. I say this not to start another he-said she-said argument but to highlight that finger-pointing will drive away (no pun intended) efforts to solve problems… and it is people working together – really the goal of the Occupy Vancouver, Calgary, Toronto, etc. movements — that we should be working towards.

I look forward to a reasoned response on who we do this.

Saturday, January 14 at 6:40 pm | Reply


First, employees have employment contracts set with or without unions and are tied to the employers ability to pay and the competetive market and include all forms of pay and benefits. The question should therefore be about total compensation and being competetive not about taxpayer funded.

Second, those promoting the pension gap were not arguing for change when the bulk of the funding of public pensions was done by the employee contributions.

Third, traditionally public sector jobs on average paid less than private sector while pensions and benefits tended to be better. Salaries and wages of public sector workers on “average” have grown in comparison to the “average” in
the Private sector.

Fourth, those creating the propaganda are generally not speaking on behalf of the “average” private sector worker, they are speaking out on behalf of the wealthier group who tranditionally would never have considered paying 6 to 9% of their wages into retirement savings.

Fifth, many baby boomers just like governments have lived beyond their means and not saved for the future and many younger individuals are being asked to pay for it and thus will have less to save for theirown retirements.

Sixth, just as many jobs have left and many in the private sector have taken cuts in pay and benefits, the public sector groups must do the same. Traditionally there was a delay between the ups and downs between public and private, the private has started down and have a ways to go, the public sector needs to start.

Seventh, as for pensions, the problem has been up and down throughout the last 50 years, this is a big downtime and for thsoe in the private sector with solvency funding the end may be near. For the public sector not required to fund as the private sector there is a much tougher road ahead.

Sunday, January 15 at 3:17 pm | Reply

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