VANCOUVER, Oct. 16, 2013 /CNW/ - British Columbia's public sector
pension plans result in a higher rate of retirement savings for their
members compared to other B.C. residents, according to a Conference
Board of Canada report, Economic Impact of British Columbia's Public Sector Pension Plans, issued today.
The required savings, part of the total compensation of pension plan
members, mean that the public sector workers effectively put aside more
for retirement than those using Registered Retirement Savings Plans to
generate income for when they leave the workforce.
"Our analysis compared the average person saving for retirement in the
province with a typical member of a B.C. public sector pension plan.
The key difference is that the pension plan member is covered by a
comprehensive defined benefit plan, which requires employees and
employers to fund the plan to cover promised future benefits," said
Michael Bloom, Vice-President, Organizational Effectiveness and
Learning, The Conference Board of Canada.
The total contribution of employers and members in British Columbia
ranged between 16 per cent and 27.5 per cent of an employee's total
compensation. Workers contributing outside a defined benefit plan have
significantly lower average savings rates.
In addition to higher contributions to retirement savings, plan members
are charged lower management fees.
About 70 per cent of these additional savings are invested in the
Canadian economy, which has an impact on investment and future economic
According to data from the British Columbia Pension Corporation, the
total contribution of employers and members ranged between 16 per cent
and 27.5 per cent of an employee's total compensation. Only one-quarter
of B.C. employees who do not have a trusteed pension plan contribute to
RRSPs, and their average savings rate is 14.1 per cent.
As a result of required savings in the form of pension plan
contributions, B.C. public pension plan members accumulate about $2.2
billion more in savings every year than RRSP savers (in similar
financial situations) in the province.
A typical public pension plan member can expect to have an annual
retirement income that is $35,000 (in inflation-adjusted or real
dollars) higher than an individual using RRSPs to save for retirement.
This estimate is based on the assumption that investment management at
the B.C. public sector pension plans was no better or worse than retail
mutual funds. More than 60 per cent of this amount is due to the higher
level of saving through the public sector pension program; lower
managerial fees accounts for the remainder of the additional retirement
The terms of reference for the study did not evaluate whether the total
compensation of public sector workers is fair when compared to private
sector workers. In addition, the analysis did not compare the returns
generated by B.C.'s public sector pension investments with those of
other retirement vehicles such as mutual funds.
Of the $2.2 billion in additional savings generated through pension
contributions, the Conference Board estimates that about 70 per cent
($1.6 billion) finds its way into the capital stock. This ratio is
consistent with other pension plan asset allocations that seek to
manage risk through geographic diversification.
The report was prepared with financial support from the British Columbia
Municipal Pension Plan. It details five case studies of investments
made by British Columbia Investment Management Corporation: Delta
Hotels and Resorts, Puget Sound Energy, various real estate holdings,
Broadway Tech Centre, and lululemon athletica inc.
The report is publicly available at www.e-library.ca.
SOURCE: Conference Board of Canada
For further information:
Brent Dowdall, Media Relations, Tel.: 613- 526-3090 ext. 448
The Conference Board of Canada
Link to publication:http://www.conferenceboard.ca/e-library/abstract.aspx?did=5828