Home / Workplace Directory / Canadian Press / Your Canadian Press pension: what’s it to you?

Your Canadian Press pension: what’s it to you?

Most workers in Canada have no pension plan. That means it is entirely up to them to save for the day they want ? or need ? to stop working. And many of them know they will have to work long after they’d rather be enjoying their golden years.

Fortunately, through the hard work and negotiation of Guild members, CP/BN employees aren’t in this position. We have a company-sponsored pension plan that guarantees a certain income after we retire. And the older you get, the more important it is. It’s money in the bank.

DB and DC Plans ? what’s it all about?
? The pension at CP/BN is called a “defined benefit” (DB) plan. That means you are guaranteed a certain income, or benefit, after you retire. That income keeps coming as long as you are alive ? and it continues, albeit reduced, for your surviving spouse/partner.

? Over the last 20 years, another type of pension, the “defined contribution” (DC) plan, became popular among employers and some workers. The only thing that’s guaranteed is how much money the employer and employee contribute. The money is invested in mutual funds or other financial markets and the benefit received at retirement is entirely dependent on how well these investments have done. And it lasts as long as it lasts, not necessarily as long as you do.

DC plans are much riskier for employees than DB plans. Employees contribute money to both plans: the difference is that you know how much you will get from a DB plan. In a DC plan, it’s all up in the air.

Research has shown that DC plans tend to give lower returns over time than defined benefit plans like ours. A recent newsletter from Mercer Human Resources Consulting (one of the largest firms in Canada) says: “?the typical DB plan return exceeds the typical DC return by 100-200 basis points and sometimes much more.”

Although research from the US has shown that some employers are switching back to DB plans from DC plans, lacklustre market returns and low interest rates in recent years have meant that employers must increase their contributions to their DB plans. So some companies with huge pension liabilities are once again looking at DC plans as the magic bullet to shift the risk of financing retirement income from the company (plan sponsor) to the employee (plan member).

? Don’t resent the deduction from your pay cheque that is put toward your pension. Think of it as deferred wages that you’ll continue to receive long after you’ve retired. Remember: you are going to have to save money to retire. By contributing to a DB plan, you know you can actually collect on it.

? If you think you can do better with a personal RRSP, think again. If your RRSP is “adequate” to last the average life expectancy, you stand a 50-50 chance of outliving your savings. Are you comfortable with those odds?

? The rate at which most people save money falls far short of what’s needed to meet retirement expectations.

There has been much talk about CP’s pension problems. Overall, our pension plan is in good shape. But tough new requirements, designed to protect workers in the event a company goes under, were put in place a few years ago. The regulations demand a much larger safety cushion and that is creating financial headaches, for CP and other organizations. It doesn’t mean the plan is in trouble, it simply means more money has to be put into it, just in case.

CP/BN’s pension plan is a very important element of your overall employment package. It needs to be protected and strengthened so that all employees, no matter their age, can look forward to retirement knowing that they’ll have an income they can count on.

For more information, talk to your Pension Trustees, Scott Edmonds and Sandra Cordon. Or contact Kathy Viner (kathy@cmg.ca) of the Canadian Media Guild at 416-591-5333 or 1-800-465-4149.

Find Member Resources

Popular Topics

Scroll to Top