CHRIS MORRIS Legislature Bureau 10 Nov 2013
FREDERICTON – Finance Minister Blaine Higgs says public sector retirees will not lose cost-of-living increases when their pensions are shifted to the shared-risk model.
Higgs said in an interview he wants to set the record straight on “misinformation” which he believes is fuelling opposition to the province’s pension reform.
He said the proposed shared-risk model is being tested in a number of economic scenarios prior to legislation being introduced that will affect the pensions of thousands of public sector employees and retirees.
Higgs said the test runs show that while the plan is designed to provide cost-of-living increases for retirees at a minimum of 75 per cent of inflation over a 20-year period, it’s actually testing at more than 85 per cent.
As well, he said the cost-of-living increases are added to base pension amounts, so the increases compound over time.
As an example, Higgs said someone earning an annual pension of $30,000 would see that grow to about $41,200 over 20 years, assuming 75 per cent of a 2.25 cost-of-living increase.
It would be significantly more if the tests prove correct and the percentage is more like 85 per cent.
Higgs said he is bothered by some of the information he sees on the Pension Coalition NB website. The Coalition, which represents public sector retirees, opposes the shared-risk model and is considering legal action to fight the proposed pension change.
“In one case, it says independent actuaries confirm that pensioners will receive no indexation for at least the next 15 years,” Higgs said.
“I would like to meet the independent actuary who makes that sort of statement. I would dare say they could be sued for malpractice . . . These are just mythical statements.”
Bonny Hoyt-Hallett of the Pension Coalition said it is important to realize that the averages Higgs is talking about are over a 20-year period and there is no guarantee that pensioners would see an increase in any given year.
“It is all very arbitrary,” she said in an interview.
“What is the issue is the uncertainty and the unpredictability. We keep saying to the minister – ‘If you are so sure we are going to get cost of living every year, at 75 per cent, guarantee it. Just make it happen. Then nobody has to worry.’ ”
Higgs said the legislation for the shared-risk plan will put it on a very secure footing.
“The plan is very prescriptive on what the investments look like so they know the reliability of the returns on investments is very high,” he said.
It is expected legislation establishing the shared-risk model will be introduced this month.
The Liberal opposition in the legislature already has said it will vote against the move. In addition to the Coalition, CUPE New Brunswick also is considering a legal challenge.
The shared-risk model, already embraced by several unions, including CUPE hospital unions, and the City of Saint John, proposes a new pension system to avoid large, unfunded liabilities and better protect retirement benefits for future generations.
Under the model, employers and employees split the costs when the plan performs poorly and share the benefits when it does well.