I sat down with a 55 year old lady who is contemplating retirement. She works for the federal government and earns $90,000. She has been with them for 30 years. Because she has been there 30 years she is entitled to full pension. She will get $55,000 per year plus inflation starting now. I did a present value calculation. If inflation averages 2.5% and she lives to 85, the present value of her payment stream is over $1,000,000. The RRSP account of someone her age without a pension would have to be over $1,000,000 to be in a similar situation. I have never seen an RRSP account over $1,000,000.
You can argue that her salary of $90,000 is too much. But, her pension is definitely too generous. This is where the tax payer gets shafted.
Unions inflate pensions rather than wages because they know that this draws little attention from the taxpayer.
Right On
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Go work for the Federal Government
ReplyDeleteI prefer to work in the private sector. And, I would rather not be paying full-dollar for their overly generous pensions.
ReplyDeleteYou do know that her RRSP contribution limit is also severely curtailed don't you? Or that her CPP gets clawed back as well? Or unlike GM, she's been paying into her pension fund? Or the Liberal government sucked 40 billion out of the pension fund, and it hasn't been returned?
ReplyDeleteNow having said that, yes it is a good pension. I know this because I am a conservative public servant myself (yes we quietly exist). I don't make as much as her, but I'm still paying about $700/month into my gov't pensions, and a helluva lot more right back to the taxman (as we all are)And yes, I've spent a lot of years in private industry, so I know what the "real world" is about.
I am also a conservative, and I hope you also know that until the Liberals came to power in 1993, salaries in the federal public sector were well behind the private sector with no write-offs, I might add. When the current government tried to limit the "equal pay for work of equal value" provisions, everyone screamed abuse. Now, some people are overpaid for that reason and because there has been no classification reform. New workers get an annual increase based on 1970's level inflation. Those of of who are retired paid a lot for our pensions. Promotion opportunities were severely limited. We also paid for the EI welfare program for all of our years, along with workers in other "safe" jobs. My top RRSP PA limit was $3400.
ReplyDeleteYou guys are wrong. If one made the maximum amount of RRSP contributions through the years and received a reasonable rate of return, there RRSP account at the age of 55 would not be sufficient to withdraw $55,000 + inflation for 30 years. Not even close.
ReplyDeleteHer RRSP contributions are severely limited because her pension is her RRSP. RRSP accounts and pensions serve the same purpose. RRSP accounts were designed mainly for those whose employer do not provide a pension.
Her CPP isn't clawed back but her OAS might be. It starts getting clawed back at $64,000ish. It doesn't happen to many people. More evidence of how generous the pension is.
Look, do the math. One without a pension needs over $1,000,000 in their RRSP to retire at 55. As RRSP contributions are capped and have always been capped, this is impossible unless you earn an unreasonably high rate of return.
$700 per month? You can triple that and it doesn't pay for that pension stream.
This is the union negotiating and the government caving. They cave because they don't pay a high political price for caving.
Look. A massive amount of your total compensation was/is in the form of your pension stream.
Right On
What a crock. All of this. shit it is.
ReplyDeleteI retired nine years ago after working over thirty five years. I didn't make $90,000 and I never knew anyone who made that much. I was making approximately $40,000 and many people were making less than me, Lets work with with those figurs
ReplyDeleteYou can only get a full pension after 35 years and it is reduced at age 65
ReplyDelete