The New Brunswick government has introduced a new pension model to make pensions in the province more secure, sustainable and affordable, according to Premier David Alward.
"A number of pension plans in New Brunswick and across North America are facing significant funding deficit issues,” said Alward. “This ‘made in New Brunswick' model, developed in collaboration with union leadership, offers an innovative way to address those issues before it is too late.”
The model was developed by the Task Force on Protecting Pensions which was mandated to examine the long-term stability and security of pensions in New Brunswick. The model has received support from several public and private sector plan sponsors, including unions.
The work of the task force consisted of extensive analysis of reports, electronic submissions and public consultation. It was guided by the following agreed-upon principles:
•pension plans must be able to pay benefits for members today and for those members who will retire in the future
•there should be no advantage to retiring before any changes are made to the plan
•pension amounts earned up to any agreed-upon revisions will not be decreased
•any changes will be incremental and implemented on a go-forward basis
•the plans must be fair to employees at all stages of their career as well as to retirees.
The New Brunswick model is based on a well-established Dutch model. Both jurisdictions face similar economic and demographic challenges, including an aging population, growing life expectancy and market returns that are not keeping pace with payouts and indexing, said the government.
The new model is a shared risk pension plan (SRPP) which is a defined benefit, target benefit plan, according to Mercer.
The new system is safer and more secure in that it discourages riskier investment practices as a means of recovering losses and has built-in flexibility to better absorb declines in the markets.
It also ensures that public sector pensions are affordable for taxpayers in the long run, said the provincial government.
Amendments to the Pensions Benefit Act will allow both private and public sector pension plans the option to adopt this model if they so choose.
“One of the strengths of this model is that it can be adapted to different public and private sector plans,” said Alward. “We encourage those plans not currently involved to engage in a similar collaborative process with the task force to see how they, too, might benefit from such changes."
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