Yet one more sign of the declining middle class. Like the financial bubble someone will wonder how did we ever let this happen. Why did we go back to a two tier society?
From: Ed Weick [mailto:[email protected]] Sent: Thursday, October 22, 2009 4:10 PM To: [email protected] Subject: Pensions One of the more disturbing things going on in Ottawa currently is the plight of Nortel retirees. About 4,000 of them were up on Parliament Hill yesterday trying to get the federal government to do something about their lost pensions. If I understand matters correctly, the pensions are being affected by two things. One is that Nortel is currently undergoing bankruptcy proceedings and in such proceedings the obligations of a company to its employees typically gets shoved to the back of the line. Other creditors come first. The other is that the Nortel pension plan consists of a seperately admnistered investment fund into which both the employers and the employees paid regular sums of money. This fund was hit hard in the recent economic downturn, so much so that Nortel is in a position to pay its retirees only about 60 percent of what it owes them. An ex-employee who was supposed to get, say, $50,000 a year after thirty years of work will only get about $30,000. Many others will probably get a lot less. There isn't much that Nortel can do about it because it's bankrupt, broke and being sold off piece by piece. The Globe & Mail is currently running a series on the state of pensions in Canada now. One of the articles in the series contained the following statistics: * 17.6 million: Number of people in the Canadian work force. * 11 million: Number of Canadian workers without pension plans. * 4 million: Number of those workers with registered retirement savings plans. * 10,000: Number of pension plans in Canada. * 4.5 million: Workers with pension plans who have defined benefit plans that guarantee the pension income of retirees until they die. * 55 per cent: Amount of those plans held by public sector employees. * $25,000: Average pension per year. (Source: Infometrica, University of Toronto professor Keith Ambachtsheer) Pension plans are of two general types. In Defined Contribution plans, the employer contributes but the employee must decide how the contribution plus part of his or her own income is invested. In Defined Benefits plans, the employer establishes an investment fund to which it and the employee contribute. The Nortel plan was of this type. Another G&M article - which I can't find right now - contained a chart which showed a substantial decline in the percentage of working Canadian with pension plans over the past thirty or so years. What the G&M series suggests is a general weakening of the means by which workers will be able to look after themselves when they retire. From the numbers above, most do not have pension plans of any kind. What is particularly worrying in this regard is that the population is aging, meaning a growing number of people unable to support themselves because of an inadequate income. They will have income from the CPP and OAS, but even with these incomes will still be at the poverty level. Many will have to work, or try to, into old age. What is also worrying is a change in the way in which workers are treated. An increasing proportion of those employed are now "associates" and not emplyees, meaning that they don't have access to many of the benefits workers traditionally had, including pension funds. I'm not sure of where all of this is taking us, but it does suggest that we are moving into a less secure future -- perhaps far less secure. Ed
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