Ontario Tory leader Tim Hudak. (QMI Agency file photo)
TORONTO -- An Ontario Tory government would consider overhauling public pensions so that new employees -- and not taxpayers -- bear the financial risks of their plan.
PC Leader Tim Hudak's white paper on "sustainable retirement security" says the combination of low interest rates, longer life expectancy and the increased number of retirees are combining to create an unfunded liability crisis for taxpayers which could be as high as $100 billion.
The Tories are proposing that all new provincial government hires be offered a defined contribution pension plan and that Factor 80 provisions, which allow early retirement with a full pension, be phased out.
"It seems whenever the government members' pension is in trouble, it's taxpayers who have to foot the bill," Hudak said Monday. "Taxpayers who don't have their own pensions are asked to pay more and more taxes for those who do."
According to the Paths to Prosperity white paper, released by the Tories Monday, the majority of public pensions are defined-benefit plans, which guarantee a retirement income level regardless of the plan's assets. The employer is responsible for shortfalls.
The trend in private sector firms is to offer defined-contribution plans, which can go up or down depending on the plan's success, leading to possibly higher returns for the worker but leaving employers off the hook for any losses.
Finance Minister Dwight Duncan called the Hudak proposals "an attack on the middle class."
While the minister agreed that retirement income is a "ticking time bomb," given the aging population, he argued that increases to CPP are the way to go.
The provincial government would have to rip up collective agreements with its workers if it wanted to move to defined-contribution pension plans, he said.
The Tory white paper zeroes in on the Ontario Teachers' Pension Plan -- which it says has an unfunded liability of $9.6 billion -- as a prime example of just how expensive a defined-benefit plan can be for taxpayers.
"There are now 2,600 retired teachers over the age of 90, including 102 that have reached the century mark," the report says. "The ratio of active teachers to retired ones is declining, meaning there are fewer contributors to bear the burden of the plan."
Economist Don Drummond, commissioned by the Dalton McGuinty government to look at public service reform, recommended scaling back benefits in the Ontario Teachers' Pension Plan, noting teachers on average retire at age 59 and some as early as age 50 with a reduced pension.
"The typical teacher works 26 years and collects a pension for 30 years," Drummond's report says.