Long awaited changes to New Brunswick’s employee pension plans have been released, but it’s barely been worth the wait.

What should have been an exercise in bold pension reform – replacing unsustainable guaranteed payout pensions with the more responsible, guaranteed contribution pensions – has turned into a union-supported minor tinkering of the pension system.

To be sure, the new package is an improvement over the existing one. Frankly, it would have been hard to make it much worse. The reforms do very little to correct the inherent unfairness of asking New Brunswickers in the private sector with no pension at all, to subsidize the generous, guaranteed pensions of those in the public sector.

In fact, according to Statistics Canada approximately 85 per cent of New Brunswickers in the public sector have a pension plan compared to just 25 per cent for those in the private sector. 

Those 75 per cent of New Brunswick taxpayers who don’t have a pension, are already on the hook for almost $220 million in unfunded liabilities in the government employee pension plan.

Moreover, payouts to bureaucrat pensioners are up three fold in just the last four years. And for two of the last three years, taxpayers had to top up the government employees’ pension plan to the tune of $48 million because pension payouts exceeded contributions and investment income.

Politicians and unions like to blame the markets for the pension deficit the province faces. But the problem is bigger than that.

The pension mess is the consequence of a bloated public sector in New Brunswick, combined with an outdated pension system.

An inquiry by the Canadian Taxpayers Federation found that the number of New Brunswick public servants earning $100,000 or more doubled in just the last five years alone. These pay increases put strain on the public sector pension entitlements as most of the pensions are based on the highest earning years of a public servant’s working life.

Some of the small steps taken recently to fix the system included moving pension calculations from a “best years” approach towards a “career-average” to calculate benefits. Averaging out the earning rather than taking the “best years” will help to move close the gap between they payments going to pensioners and the amount they actually contributed.

Another positive change is that the cost of living adjustments on an individual’s pension will only be paid if the plan is solvent.

However other changes, like moving the retirement age from 60 to 65 are meaningless, as the government will not fully phase in the reform until 2062.

Both employees and the employer (i.e. government) are going to be paying more in premiums, but no one is saying yet exactly how much more. Not that it matters since David Alward’s new union supporters (The New Brunswick Union, Canadian Union of Public Employees Local 1252, New Brunsiwck Pipe Trades and NB Nurses Union supported these reforms) will ensure at the next contract negotiations they get salary increases to make up for any increase in pension premiums.

The CTF had hoped the government would take the opportunity to put the final nail in the coffin of defined-benefit pension plans. These plans that guarantee payouts to retirees for life are now obsolete in the private sector and should have been replaced with a defined-contribution plan that matches an employee’s contribution into a pension account, much like an RRSP.

Ordinary New Brunswickers are increasingly postponing their own retirements because they can’t afford it. Asking them to continue to bailout insolvent government employee pensions is inherently wrong.

The Alward government was right to take on the difficult task of reforming pensions but should have taken the opportunity to make more aggressive changes to protect the majority of New Brunswickers.