New Democrat Pension Critic Wayne Marston reintroduced legislation today to put pensioners ahead of creditors when their former employers go bankrupt.

The proposed Pension Protection Act would move pensioners to the front of the line of creditors to be paid out during bankruptcy or restructuring proceedings.

Pensions are earned, explains Marston, and should be recognized as deferred wages. Currently, when a company goes into bankruptcy, pensions are considered unsecured debt, and only paid out from the company’s remaining assets after the Crown, banks and other investors get their money.

“At the present time, someone who has been retired for a decade, after working for a company for 30 years, can suddenly find their pension cut by upwards to 40% through no fault of their own, simply because her former employer goes into bankruptcy,” says NDP Deputy Pension Critic, Alain Giguère. “This is wrong, and the law must be changed.”

Copyright © 2021 Transcontinental Media G.P. Originally published on benefitscanada.com

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Earl Martin:

As a “pension person” I’m fully in support of the rights of plan members, but this could hasten bankruptcies by making lenders less willing to extend credit to companies in need.

Wednesday, October 19 at 3:31 pm | Reply

Maurice:

What is more important? The lenders’ greed? Or the security of pensioners who worked all their lives? No civilized country would choose the former!

Friday, November 11 at 1:10 pm

Jim Johnstone:

Eral has it backwards: In USA and Europe and elswhere, investors are used to this guarantee. It just puts more emphasis in assuring that funds are up to date before investors will invest.
Jim

Friday, October 21 at 7:35 pm | Reply

Robert Fatt:

Jim, Earl’s point is legitimate because, in the USA and the UK, for example, the government has established a national pension guarantee fund that continues to treat pension claims as unsecured claims in bankruptcy (as in Canada), but unlike Canada (outside of Ontario) the US and UK governments pitch in to cover any shortfall.

The guarantee fund does not affect creditors willingness to lend because they still get paid out in full (provided that they have secured claims) and the taxpayer is on the hook for the deficit.

The problem with the NDP’s proposal of a shift in bankruptcy priorities (as opposed to a national pension guarantee fund) is that it DOES affect creditors willingness to lend because it would rank pension claims (typically one of the largest claims) above everything. The cost of capital will dramatically increase and stunt economic growth. This is the reason it will never be passed.

Tuesday, December 13 at 11:43 am

Gladys Comeau:

As the surviving spouse of a Nortel employee living this ordeal and anxiety government must act on legislation as Mr. Marston has put forward. We have already proven that as Earl Martin wrote, making lenders less willing to extend credit to comapnies in need is not the absolute truth and all who lobbied this government to believe this were wrong and must retract their statements

Saturday, October 29 at 6:45 am | Reply

Marilyn Peet:

As I am a retired Nortel employee with 37yrs & 10 months of service- the Proposed Pension Protection Act if it goes
through would be welcoming news. after losing 43% of my
pension plus clawbacks for previous overpayment. This has been quite a shock for me & other Nortel retirees.

Saturday, October 29 at 3:33 pm | Reply

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