JOHN CHILIBECK LEGISLATURE BUREAU
FREDERICTON • As a conservative economist, David Murrell had always argued in favour of switching publicly supported pensions to the shared-risk model, meaning retirement incomes would not be guaranteed if pension investment funds fared poorly.
But now the retired University of New Brunswick professor has become a shared-risk victim — the fund will not pay out any cost-of-living adjustment this year because of its poor performance.
And other public sector pensioners in the province who have lost their defined benefit plans warn they could be next. “I shouldn’t complain because retired university professors are well paid,” Murrell said in an interview Tuesday. “But it’s another thing for a secretary in the public sector who made lower wages.” In a mailing he received last week, Murrell got the bad news: the board of trustees for the shared-risk plan for academic employees of the University of New Brunswick said its pensioners would not get a cost- of-living increase this year. Murrell guesses the loss will cost him between $500 and $600 on a pension worth around $55,000 this year. “I favour the shared-risk system as an economist and a fiscal conservative, bean-counter type,” he said.“But I guess this serves me right. It’s just desserts and you can see what can happen. So on a personal level, I’m upset with the consequences.” Norm Betts, a UNB business professor and co-chairman of the university pension board, said in an interview Tuesday the shared-risk model was working exactly as it was intended to — spreading around the pain when market investments don’t do as well as hoped for. “All the participants, the employer and pensioners share the risk,” Betts said. “There are triggers and thresholds that have to be met for cost-of-living benefits to be granted.” In the three years the pension has been under shared risk, cost-of-living adjustments have been paid out the majority of the time to about 500 pensioners in the plan, ranging from 0.96 per cent to1.49 per cent of someone’s pension. This is the first time it’s been zero. But the system also allows for a catch up — the adjustment can be increased in future years if the fund performs better.
“This is small effect,”Betts said.“I don’t want to minimize it, but it’s working exactly as it was agreed to by the parties that signed the agreement, UNB’s management and the faculty’s union.”
The university retirement fund was assessed for the period ending July 1, 2016. Betts said the fund’s managers hit their benchmarks, based on a percentage of how the markets performed overall, but the market performance wasn’t strong enough to guarantee the cost-of-living adjustment.
Others are watching the latest developments with concern,notably Claire LePage, the chairwoman of Pension Coalition New Brunswick. Her group is suing the provincial government in court for switching them to the shared-risk model, arguing their old unions and the province had no right to change their pension. So far, regular provincial government retirees haven’t lost their cost-of-living allowances since their pension was switched to the shared-risk model three years ago. Their funds have performed better. “Ours has been doing OK so far,” LePage said in an interview Tuesday. “But we’re concerned. That’s why our challenge is still in court. We’re continuing with the lawsuit because there was breach of contract and we feel the pension trust fund was stolen from us.” The previous Tory government converted the Public Service Superannuation plan to a shared-risk pension in January 2014 — a move that was welcomed by some public sector workers, notably nurses, and condemned by others. Among other things, the new shared-risk structure increases employee contributions; pushes retirement age without penalty to 65; increases early-retirement penalties from three per cent to five per cent per year; calculates the pension benefit on a career-average salary rather than the best-five-years salary; and removes automatic yearly indexing. The provincial government did not respond to messages for comment Tuesday. The next court hearing on the pension fund is at the Court of Queen’s Bench in Burton June 26.
Link to article: No_cost-of-living_boost_for_UNB_pension_-_The_Daily_Gleaner_2017-05-24 (2)
