The Pension Promise

dscf0114Private pensions are a public responsibility and in the best interests of workers and employers.

During the 18th century in England, pensions were more of a charitable consideration than a basic human right. Pension contributions were usually locked in to prevent workers from using the benefits for immediate consumption. Public sector plans are specifically designed to provide extensive and complete coverage for their workers.

"In sharp contrast, about 25 per cent of all members in the private sector plans are in plans that provide spousal benefits. Another 25 per cent of the members are in plans that provide for a return of employee contributions only, while another 15 per cent are in plans that pay out the employee's contributions together with vested employer contributions. The largest group - nearly 30 per cent - are in non-contributory plans that provide no death benefits whatsoever."

Chapter 6:  Plan Design/Death before Retirement

Private pension sponsors follow strict funding requirements and sound investment practices that are enforced by the regulatory authorities. Inflation can dramatically erode and destroy the purchasing power of fixed income plans. Many firms have claimed that they lack the proper funding to finance any sort of benefit improvement initiatives.

"The private pension system is a major program with an annual cash inflow of nearly $13.6 billion in contributions alone. By 1988 it had amassed close to $272 billion in assets to meet ultimate commitments. For a program accumulating such mountainous sums, equal to the GDP of some countries, the record of benefits paid out is grossly inadequate."

Chapter 10:  Fulfillment of the Promise

Sponsors of private pension plans have a moral and social responsibility for providing strong income support to the former employees that helped make the company a success. Large surpluses should be used to provide inflation protection and improve benefits within the plan. They are instead being used simultaneously to lower pension costs, boost assets and reduce employer contributions to the plan. Pension benefits provide desperately needed income for retired workers. The on - going battle over surplus ownership and the lack of inflation protection of a plan's assets threatens the continuity and integrity of the entire private pension system.

The Pension Promise was sponsored by the Social Sciences and Humanities Research Council of Canada and published with the help of a grant from the Social Science Federation of Canada.  

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