May 2011

The issue of public sector pension plans is back in the headlines with the recent election. Several defeated MPs are now entitled to their "gold-plated Pension plans".  As a public sector civil-servant, I wish to chime in with my two cents:

Many in the private sector complain that they don't have pension plans, like those in the public service.  Many in the public service have "defined benefit" pension plans (a guarenteed, indexed retirement income) as opposed to a "defined contribution" (the value of the plan is what you all you get), which are common for those in the private sector who are lucky enough to even have a pension plan.  

Some companies, like one that I worked for when I was in the private sector, sponsor RRSP plans, where the employer will match what ever the employee contributes.  

Yes, public sector workers generally have very good job security, salaries, defined benefit pensions and annual wage increases, but we're not all getting rich.  The way I see it, having the perks I just mentioned are the trade off for the potential of making big salaries in the private sector, which is one of the reasons I decided to go into government work.  Besides, I pay a percentage of my gross salary into the pension plan, along with my employer also paying their required share.

Let's face it, in the private sector, when times are good, times are REALLY good.  At some private companies, an employee's year end bonus can equal to more than 3 - 6 months salary for me (JUST their year end BONUS).  Now I do realize that private companies can do what they want with private money, and these extravagant bonuses are the reason some companies are in trouble now (the auto manufacturers), but my point still stands.  A police officer doesn't get a commission on the number of traffic tickets they write or on the number of arrests they make, but a talented salesperson can often make big money, either though commissions or sales bonuses, for being a top seller at their company.

I keep hearing in the media about private sector workers who make six-figure salaries.  If these people don't have a company pension plan, I feel compelled to ask this question:  how much of your net income are you putting into a private pension plan or RRSP?  Are you saving anything for your future or are you spending your disposable income on BMWs, ATVs, big screen HD televisions, cottages with boats and sea-doos, dinners at fine-dining restaurants and one or all of the numerous electronic toys that are such an important part of our daily lives? I once heard a caller on a Toronto talk radio station mention that for two years in a row, he earned bonuses of close to $20,000 each year. The caller stated that of the combined total of almost $40,000, he contributed only $4000 to his retirement fund.  Where did the rest of the money go?  Now, I should give him the benefit of the doubt that maybe he put most of that money on his mortgage, but you do have to wonder where it went.

Someone close to me was earning $84,000 per year, at the age of 24, working for a major computer programming company.  As a pubic sector employee for the past 24 years, I have yet to reach that threshold, although I am finnaly getting close.

Now I realize that not everyone out in the private sector doesn't make anywhere close to a six-figure salary (Walmart and Tim Hortons employees, just to name two), but I think that anyone earning an income can put something away for their retirement.  Now I realize that for some people, the monthly budget is extrememly tight, but how many coffees do you buy from Tim Hortons?  How many lottery tickets do you buy each week.  Do you smoke?  Maybe you could take some of the money spent on such items and put them into a savings plan.  Many employers offer RRSP deduction plans, where they take automatically take money off your paycheck and put them into the savings plan of your choice.  As someone who takes advantage of such savings methods, I can say that after a while, you really don't miss the money.

I also take my spare change at the end of the day and put it into a container in my kitchen, which I call my "lottery fund", which I call such because I figure I have a better chance of getting money out of this container than I have of getting from the lotto.

By the way, how many people realize that, as a municipal government employee (getting a pension through OMERS), that my retirement medical benefits run out when I am 65?  Yes I will be getting an indexed, guaranteed pension, but at 65, I will have to buy supplemental health insurance to cover things like medicine and dental care.  Teachers, believe it or not, are in the same situation too. 

This is in addition to having my OMERS pension clawed back when I start collecting the Canada Pension.

Not quite the "gold-plated" pension plan that some people think we have.