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October 15, 2013
For immediate release
Action is required to keep public sector pension plans sustainable and affordable
Finance and Energy
Government must take measures to ensure Prince Edward Island’s public sector pension plans are sustainable and affordable, says Premier Robert Ghiz.
“The average Canadian is living longer and retiring sooner than ever before,” said Premier Ghiz. “This has left a growing gap between how much people take out of the pension plans versus how much they pay into them. These changing demographics, combined with investment volatility during the global economic downturn, have placed significant strain on the plans. We must act now to keep our public sector plans stable, secure and affordable.”
Since 1993, in addition to its regular employer contributions, the Province of Prince Edward Island has made special payments into its pension plans totalling millions of dollars. Even with this extra funding, it has been unable to offset the increasing costs.
In January 2013, both the employer and employees increased their plan contributions by one percent. This was a positive first step, but it is not enough to meet the challenges facing the plans.
Today, after many months of discussions with stakeholders, financial experts and officials, Government announced further reforms that considered equally the needs of current employees, those close to retirement, retirees and taxpayers.
• Retiree pensions will not be reduced from current levels but, beginning in 2017, annual cost-of-living adjustments will be contingent on the Fund’s ability to pay;
• Any pension benefit earned by current employees as of December 31, 2013 will not be reduced but, beginning in 2014, pensions will be calculated using an average of their indexed annual earnings. This means the earnings used to calculate their pension will be protected against inflation; and
• To address the fact that people are living longer in retirement, Government is also introducing a change in the age at which employees can draw a non-reduced pension. This change will take effect in 2019.
“Pension plans right across North America are facing the same pressures and challenges,” said Finance, Energy and Municipal Affairs Minister Wes Sheridan. “We believe these changes are fair to current employees, retirees and taxpayers and will ensure our plans are sustainable now and well into the future.”
The changes will be introduced during the fall session of the legislature. For more information, visit www.gov.pe.ca/pensionplans.