Your Pension - Myths vs. Facts
1. MYTH: The Public Service Pension Plan is not sustainable.
FACT: Not only is the Public Service Pension Plan financially sustainable but it is among the best-run defined benefit pension plans in Canada. As indicated in section C on page 8 of the actuarial report on this plan, it is on solid long-term financial ground.
2. MYTH: Private sector pensions are inferior to public service pensions.
FACT: Most private sector defined benefit pension plans are very similar to the public service pension plan. The main differences are that private sector employees contribute less into their plans, and that public sector pensions are more secure and better indexed.
3. MYTH: Defined benefit pension plans are not sustainable.
FACT: The rate of investment earnings on pension plan funds naturally varies from year to year. When these earnings are unfavourable over a given period of time, a defined benefit plan may suddenly appear unsustainable. However, as pension plans are long-term financial schemes, a short term unfavourable return on investment does not affect the long -term sustainability of a defined benefit plan unless the plan sponsor would then coincidentally go bankrupt.
There are new international accounting standards which exaggerate the estimated level of insolvency of a defined benefit plan by requiring, when investment markets are struggling, that the plan liabilities be assessed as if the investment markets were to struggle forever.