Canada’s auditor general warns that prolonged low interest rates, lower-than-expected returns on assets and increasing longevity could have a significant impact on public sector pension liabilities and on the financial position of the government.
“It is therefore important that public sector pension plans be designed and managed in a way that considers not just present circumstances but also protects the interests of current and future employees and taxpayers,” says Michael Ferguson, auditor general of Canada.
In his spring 2014 report, he notes that, over the last three years, pension funds experienced funding deficits totalling $6.5 billion. Special payments were required to cover the gap. For 2013, special payments totalled $741 million. Over the last two years, these payments totalled approximately $1 billion.
The audit also looked at how the Treasury Board of Canada Secretariat, the RCMP, National Defence and Finance Canada have carried out key responsibilities to manage the federal government’s pension plans for public servants. The federal government’s net liability relating to these pension plans exceeds $150 billion.
While the legislative framework disperses responsibilities among a number of entities, the current governance framework has not assigned responsibilities for assessing the sustainability of the plans and does not include a funding policy.
“Although we found that the entities we audited have carried out their responsibilities under the law,” he says, “no one is responsible for carrying out a regular and systematic assessment of whether Government of Canada pension plans are sustainable over the long term.”
Related articles: