Comparing Private and Public Pension Plans

The Canadian Federation of Independent Business (CFIB) and C.D. Howe Institute claim that public service employees have gold-plated pensions. The Professional Institute of the Public Service of Canada would like to challenge that misconception using facts from neutral sources.

Myth: Defined Benefit (DB) Pension Plans are on their way out.

Government regulators and pension consulting firms claim that Defined Benefit (DB) Pension Plans are being phased out. However, according to Statistics Canada reports and information gathered in the CANSIM Table 280-0012, comparisons between Defined Benefit Pension Plans and Defined Contribution (DC) Pension Plans tell a different story.

Click here for all Statistics Canada pension tables: http://www5.statcan.gc.ca/cansim/a33?RT=TABLE&themeID=70008&spMode=tables⟨=eng

These Statistics Canada tables are generic and some effort is required to obtain the information to correct the misconceptions. Without altering the raw data from Statistics Canada, we have prepared tables (see links to annexes below) based on the Statistics Canada data that you can replicate yourself.

Contrary to media reports that have been published, the CANSIM Table 280-0012 shows that overall membership in pension plans across Canada rose 5% between 2006 and 2010. The number of pension plans increased by 26%; i.e. to 3,998 pension plans. (see Appendix 1) What is really surprising is that although the number of Defined Benefit Plans has grown by over 50% during this time period, the number of members in these Defined Benefit Plans has actually decreased. One possible reason may be that numerous small Defined Benefit Plans have been created for executives but not for their employees.

Additional claims that Defined Contribution Pension Plans are the way of the future can also be refuted by Statistics Canada data. Between 2006 and 2010, the number of Defined Contribution (DC) Pension Plans dropped 5%; however, the number of members in these DC plans has increased. This could be construed as good news, since belonging to any pension plan is better than none; however, it is more likely that the increase is attributable to the private sector converting Defined Benefit Pension Plans to Defined Contribution Pension Plans for new employees.

Myth: Public sector plans are gold-plated and much better than private sector plans.

This is the primary argument and complaint of the CFIB and C.D. Howe Institute, and other right-wing groups. When reviewing CANSIM Table 280-0022. (see Appendix 2), the data shows that the total number of private sector Defined Benefit Plans is 17,881 and that 92% of Defined Benefit Plans in Canada have a benefit rate of 2%. Interestingly enough, both the public and private sectors are close to this average. So, what does that mean? It means that if you are lucky enough to belong to a pension plan in the private sector, it is likely in a Defined Benefits Plan with the same benefit rate as that of public sector.

Myth: Public sector employees don’t pay for their pensions. Cost-sharing should be increased to 50%.

CANSIM Table 280-0012 indicates that 97% of the public sector plans are designed so that members must contribute. In fact, 99.8% of employees in the public sector are contributing to their pension plans.

In addition, there is mounting evidence that suggests the private sector plan members also contribute significantly less. (see Appendix 3)

In comparison, 35.9% of private sector plans are designed so that members do NOT have to contribute. In fact, only 33% of private sector workers actually contribute to their plans.

The Institute is of the opinion that right-wing groups, such as the CFIB and C.D. Howe Institute, are providing Canadians with inaccurate rhetoric and smearing pensions across the board, especially in the public sector. The Institute and other bargaining agents are fighting to increase pensions across the board. Pressure is being applied to government to create pension plans for those in the private sector that do not have a pension plan.