Finance Minister Wes Sheridan
Provincial civil servants and government have agreed to a slight increase in pension contributions, but a sense of deep unease is developing among unions as further pension plan changes go up for discussion.
On Friday, Finance Minister Wes Sheridan announced the pension fund working group made up of government and union representatives agreed to increase pension contributions of both public employees and government by one percentage point.
Sheridan told reporters this will represent an $8 million total yearly increase in contributions to the two provincial pension funds.
But this falls vastly short of the hundreds of millions in pension shortfalls seen in recent years.
“It does not answer (the unfunded liability) at all, Sheridan admitted.
“But what’s more important is we’ve had full collaboration from our unions. We’ve sat with them a number of times and talked about ways in which we can mitigate this... but we’ve got to protect that base. We can’t have further erosion of this pension plan.”
Actuarial reports show P.E.I.’s pension shortfall ballooned to $436 million this year. The province must pay $230 million into the two pension funds over the next 10 years to cover government’s legislated responsibility to keep the funds financed to 90 per cent of their total value.
It’s these kinds of super payments that have prompted government to look at ways to redesign the way pension funds are managed.
Sheridan says it’s not fair for all P.E.I. taxpayers to be on the hook for hundreds of millions in pension losses.
“We can’t continue to go back to the well and ask for supplementary income from everyday taxpayers of Prince Edward Island,” he said.
“A lot of these people do not have a pension themselves and it’s hard for them as a single parent, for instance, to put their hard-earned tax dollars into the pension plan.”
But it’s this kind of rhetoric that has unions concerned.
New UPSE president Debbie Bovyer said a perception exists among many that P.E.I. civil servant pensions are ‘gold-plated.’
“The average pension is about $16,000 a year, which is not a lot of money. Our members aren’t living large when they retire,” she said
That’s why Bovyer says it concerns her to hear comments about taxpayers being on the hook for public service pensions.
She believes government wants to move from the current defined-benefit plan, to a defined contribution plan.
“It’s not the plan that we currently have and it doesn’t have the benefits that are currently being provided,” Bovyer said.
“That’s not a place that we’re looking to go.”
Up until now, talks between government and unions on pension reforms have been positive. But if the benefit model changes, UPSE will not be so cooperative, Bovyer added.
The pension fund working group is scheduled to meet again later this month, where its agenda going forward will be defined.
The union believes further increases in contributions will likely be on the table as well as the reduction of future benefits.
Sheridan said the current one percentage point contribution increase will mean a reduction of approximately $15 per pay cheque for provincial employees.