Are Public Sector Plans Unsustainable?

New report says yes.

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road ends signEnrolments in public sector pension plans have been growing at twice the rate as growth for private sector employment levels, meaning Canadians could face higher taxes and reduced government services unless action is taken soon, finds a new report released by the Canadian Federation of Independent Business (CFIB).

At the beginning of 2011, there were 3.14 million members of public sector plans—an increase of 26% since 2001—while private sector pension levels remained flat.

However, the CFIB says total contribution levels are not the problem. The organizations research shows that public sector plans are underfunded by more than $300 billion, despite a generous $10,000 per year being put aside for the average public servant in employer and employee premiums.

“The escalating costs of government pension plans are seriously eroding the ability to deliver fundamental public services,” said CFIB president Dan Kelly. “The implications are starting to be felt. For example, the City of Montreal’s pension plan now eats up 13% of its operating budget—even more than the amount devoted to public transit.”

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