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Four points to clarify information from the Task Force

(Note: The Coalition receives comments and concerns from retirees around the province. On occasion we may publish these on the website for others to see and share.)

Dear Clifford:

There are a few points that should be made about information being circulated by the pension “Task Force” hired by the Province.

The first is that we are to be getting the “Dutch  Model” of pension plan. According to literature probably prepared by the “Task Force” itself, headed “Government of New Brunswick”, and titled “Frequently asked questions for retirees”, we are getting a “made in New Brunswick pension model” (paragraph 9), which is “an improvement to the highly successful Dutch model...” (paragraph 10). We are not getting the “Dutch model” itself.

The second is that we are getting a “shared risk” pension plan. The expression “shared risk”, is a complete misnomer – a handy expression used to make the whole proposed change sound reasonable, and anyone who opposes it, unreasonable. The fact is that aside from its annual contributions, matching or in some manner related to employee contributions, the Province will bear no risk whatsoever. All of the risk associated with the markets, investment skill, etc., will be borne by the employees/pensioners. The Province makes its annual contribution, and that is it. All risk is borne by the employees/pensioners. There is no “shared risk”.

Third, we keep hearing about how neither the young, nor the taxpayers, can continue supporting the old. In fact, our regular contributions, and the “regular “ contributions which the Province was supposed to make were to be invested, and this money together with the proceeds of investment (and the New Brunswick Investment Management Corporation has done a good job of managing the investments) are there to pay our pensions. Our pension money is already there. Payments to us do not depend on current contributions from those still working, or from the taxpayers (except to the extent that top-ups are required because of a recent actuarial review, and because the Province for some years did not make its contributions, and may have actually taken money out). Our Provincial Government, as represented by the “Task Force” would have the public believe that our gilded pensions depend on current contributions by those still working, and the taxpayers. This is not what our pensions depend on. There is no “intergenerational unfairness”, as alleged by the “Task Force”.

Finally, the recent actuarial review is based on increased life expectancies, and current returns on investment. The fact that people are living a bit longer is not a recent discovery – it has been well known for some time. More importantly, you don’t need an actuary to see that if in the past you were getting 4% on your investments, and now can get only 2%, it takes twice as much capital to get the same amount of return. Interest rates are historically low, at present, but this condition will not last for the next 70 years. Many of us remember that interest rates were around 20% in the early 1980’s. Pension plans all around the Country are affected by current low returns, and said to be in deficit, but a few years from now interest rates will probably be on a long curve upward, and investment returns much improved. It is very unrealistic to plan for the next 70 years based on present interest rates. The drastic measures being described are not realistic, given that investments for pensions are long term. (NB
IMC has done a good job, even over the past few years of low investment returns.) Using present interest rates/investment returns as the base for long term planning is not reasonable.

Paul Blanchet - retiree