[CHARLOTTETOWN, PE] – The P.E.I. government will spend the next 10 years paying off a $230 million shortfall to its pension plan – a financial sting that has sparked talks about changes to the fund's management.
The actuarial report, which is performed on the province's unfunded liabilities every three years, was released last month. It showed P.E.I.'s pension fund has lost a significant amount of money over the past few years and is $230 million underfunded.
Finance Minister Wes Sheridan says this unfortunately doesn't come as a surprise. The fund has suffered from the effects of the economic downturn ever since the 2008 recession.
"This last downturn has been very, very difficult to come back from, and the overall base (of the pension fund) was eroded for quite a time period," Sheridan says. "We're back to where that base was, but that lost opportunity cost of those years when you weren't growing and weren't at the level where we were in 2007 makes it very difficult to continue to get the returns."
The province has budgeted $23.1 million over the next 10 years to address the pension shortfall.
But it has also launched a working group made up of government and union representatives to look at ways to mitigate future funding shortfalls.
This group has met several times already and talks have so far been 'encouraging.'
Sheridan sayus he wants to work with the unions to come up with a made-in-P.E.I. solution to make public sector pensions more sustainable and affordable.
"We're trying to look at ways in which we can do a smoothing to take away that volatility, so that huge ups and downs will not occur each year and have such an impact on our fiscal year and the budget that we have to put together every year," he says. "We're looking at everything. One of the prospects that right now we're encountering and kind of assessing is the New Brunswick plan."
New Brunswick announced a major overhaul of its pension system last May, with changes that will see increased contribution levels for employees and a raising of the retirement age from 60 to 65 phased in over a period of time.
Sheridan says this plan wouldn't entirely be adopted in P.E.I., but he wants to examine potential benefits in New Brunswick's model and how those could be applied here.
Karen Jackson, interim president of the Union of Public Sector Employees, says although she supports exploring ways of making the pension fund less volatile, she is apprehensive about the notion of following New Brunswick's plan.
"We would like to keep what we have and discuss changes that would make (the fund) sustainable into the future without going down the road that New Brunswick has," Jackson says.
Nonetheless, unions are encouraged over the fact they've been invited to be part of discussions around possible changes to the way their members' pensions will be managed.
"I think the feeling of most unions that are involved in the discussion is, having the unions involved it ensures the interests of our public sector workers are considered and protected," Jackson says.
Opposition finance critic Steven Myers says he's pleased government is looking for ways to stop losses of hundreds of millions in pensions in the future.
But he says he wonders why this work did not start sooner.
"The stock market started to go south in 2008 and he knows that and common sense says that he should have started this process four years ago," Myers says.