December 12, 2012
Sisters and Brothers
Canada Post is proposing dramatic changes to your pension plan. The Corporation wants all members who are currently employed and who do not plan to retire within five years to have a different retirement benefit.
The Corporation is proposing the following:
- An early retirement eligibility for an unreduced pension at age sixty-five (65) with two (2) years of eligible service (currently age sixty (60); or
- At age sixty (60) with thirty (30) years of eligible service (currently age fifty-five (55).
After the signing of a new collective agreement, Canada Post proposes that newly hired workers will have a Defined Contribution Plan which will not provide a guaranteed retirement income.
Here are the differences between the two plans:
Defined BENEFIT Plans - The Pension Promise
All UPCE members and most Treasury Board and Crown Agency employees currently have a Defined Benefit Plan. With this kind of plan, retiring workers know how much their monthly pension income will be. The pension is based on the number of years an employee has worked for a particular employer and is usually a set percentage of her five best years of income.
We call that the Pension Promise - you know what your pension will be, and you know that the money won't run out during your retirement.
In a Defined Benefit Plan, contributions are usually cost-shared by the worker and the employer and are based on a percentage of salary.
Generally, contributions to the plan are pooled and invested - sharing the risk to make sure the Pension Promise is kept. If there is a fund shortfall there is a legal obligation on the part of the employer to make up that shortfall.
Defined CONTRIBUTION Plans
As in a Defined Benefit Plan, Defined Contribution payments are frequently shared between the worker and the employer as a percentage of salary. These contributions usually go into some sort of private sector mutual fund.
But that is where the similarity to the Defined Benefit Plan ends. With a Defined Contribution Plan there is no Pension Promise. There is no guaranteed monthly income on retirement. And there is no guarantee that the money will last for all of your retirement. Any shortfall would have to be made up, to the degree possible, through either Canada Pension Plan, Quebec Pension Plan or Old Age Security.
In a Defined Contribution Plan, you are on your own. Poor mutual fund choices or badly-performing stock markets can seriously affect your take-home retirement pay. Mutual funds still deduct their fees for managing your fund - whether it does well or poorly - and the fees will eat away at your nest egg. There is no obligation on the part of your employer to make up the difference if you happen to retire when the market is in a downturn.
In solidarity,Your bargaining team
Date Modified : 2012/12/12