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Public sector pension plan to get overhauled - Chris Morris, Telegraph Journal


FREDERICTON - Despite a strong investment performance this year, the New Brunswick government is pushing ahead with plans to overhaul its public sector pension plans.

The financial assets of New Brunswick's public service, teachers' and judges' pension plans grew to more than $10 billion by the end of 2012-13, largely due to impressive investment returns, the New Brunswick Investment Management Corporation said in a statement Wednesday.

The corporation said due to over $800 million in valuation gains and $166 million in special funding payments, the plan posted a profit of about $700 million after net pension payouts of $305 million.

Finance Minister Blaine Higgs said he is pleased with the pension performance but not swayed from his determination to convert the plans to a sharedrisk model.

"It doesn't change any of the long-term view on the pension reform," Higgs said in an interview.

"It has been a good year for returns. We have seen that in other investment portfolios. As far as a long-term strategy goes, even with returns that were better than they have been for some time, we still invested about $140 million in special payments into the pension plans. The long-term issue is how we're going to get back to a normal contribution from employees and employers that makes sense so the fund can carry itself with normal returns." Higgs said there have been only three years in the past 20 where the government has not been forced to top-up public pension plans with special payments. He said the payments have ranged from $40 million to the $140 million paid last year.

"I don't see this year's performance changing anything in terms of what we have to resolve for the implementation of the plan,"he said.

Higgs has described the public service plans as "dangerously underfunded and requiring millions of dollars or significant amendments to again become sustainable." Retired civil servants currently have guaranteed pensions, with taxpayers shoring up any shortfalls to their plans. They are the kind of defined-benefit plans that are becoming increasingly rare in private industry.

But public sector retirees have raised concerns about the proposed sharedrisk model, warning it means the loss of guaranteed cost of living increases, the loss of the province as the sponsor and guarantor of the public sector plans and the possible reduction of base benefits, among other things.

In a statement Wednesday, Pension Coalition spokesman Ernie MacKinnon said the retirees do not expect a strong performance in the plans to make a difference with the government.

"It has been clear to plan members for quite some time that the current deficit in the pension plan is only a part of the reason for planned reforms," MacKinnon said.

"Government's desire to make drastic changes are mainly driven by balance sheet issues. Government wants the pension obligation gone off their books and shared risk is the only way, regardless of whether it is the best option to tackle funding levels now and funding risks down the road." MacKinnon said the coalition is talking to the government to see if pension concerns can be worked out.

"We are trusting that government is sincere in engaging with us for our mutual benefit,"he said.

The investment management corporation, a Crown corporation, said it was able to take advantage of the relatively slow economic rebound that has occurred since the financial market crisis in 2008-09 while protecting against interim periods of increased volatility and market declines.