Finance Minister Jim Flaherty has said that pension reform is coming soon. Unfortunately, it may not be what many Canadians are hoping for. With existing company pension plans underfunded by a total of about $50 billion, many Canadians who are retired or near retirement are justifiably worried.
One of the more notable company pension plans in trouble is Nortel’s. Without any reasonable prospect of further contributions to Nortel’s pension plan, pensioners would like to see the government back the plan with financial guarantees.
The same is true for those hoping to draw from other pension plans that are in financial trouble. But the Harper government hasn’t given any sign that it intends to pony up the massive pile of cash that would be necessary to back these pension plans.
All indications at this point are that Flaherty intends to change the rules going forward to encourage companies to be more conservative in their pension funding. For example, the surplus cap of 10% may be increased.
However, none of this will help people whose pensions are threatened right now. Nortel pensioners want government backing, but should taxpayers be made to pay for this? Even if the government relents and decides to back pension plans, it is likely to have various restrictions and caps that would leave pensioners receiving less money than they were promised by their employers.