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By Ryan Goldsman
Special to the Financial Independence Hub
When times change but our pension options don’t, we are quick to point the finger. “You made a promise, now I’m going to hold you to it. Even though it will be paralyzing for you to keep this promise, that’s ok – you will keep this promise.”
“Oh and by the way, the next generation is entitled to the same promise.”
It makes no sense, but last summer we’ve seen a few major employers — Canada Post and GM (General Motors) to name a few — go into the wee hours to get a deal done, both arguing over pension benefits. It’s been a major sticking point for a number of employers and their employees over the years and will only continue to increase in frequency.
The reality is the DB (Defined Benefit) Pension Plan — which was a very good idea a generation ago — is no longer readily offered to employees today. Effectively, gone are the days of the gold watch and the even more valuable promise of income for life: “You don’t have to worry, we’re your employer, we will worry for you.”
In the past, an employee gave the very large majority if not 100% of their working years to one employer; in return he or she was offered the benefit of income until death and it was the employer who would pay up if needed. It was a wonderful deal for employees who lived to an average age of under 70. Employers were also able to hire the best employees and make them this promise. It made sense. With contributions made over 30 working years and a payout not usually exceeding 10 or even 15 years in the worst case, employers had a fair amount of money in the employee pension plan, allowing everyone to sleep well at night.
Many pensions today underfunded
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