Public sector pension plans raise retirement savings in British Columbia
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
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.
| HIGHLIGHTS |
| -- 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 growth. |
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
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
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
Brent Dowdall, Media Relations, Tel.: 613- 526-3090 ext. 448
E-mail:email@example.com The Conference Board of Canada
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-0- Oct/16/2013 16:00 GMT
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