March 18, 2003
Kamloops Daily News



"The government is not responsible for changes to the
retired B.C. Government Employees benefit package.  There
appears to be some confusion regarding this issue," MLA
Claude Richmond (Kamloops Daily News, January 20, 2003).

Indeed, there is some confusion regarding who is responsible
for the decline of pension benefits for retirees.  Richmond
says "not us" but the facts speak otherwise.  It's a matter
of cause and effect.   

When the government increased health care premiums by 50 per
cent, everyone had to pay more for health care including
pension plans.  Since pension funds have limited funds for
benefits, coverage had to be reduced.

"It is entirely incorrect for Mr. Richmond to say
categorically that the government is not responsible for the
government employee health benefit package," says the Chair
of the Public Service Pension Board of Trustees, John Cook
(KDN, February 8).

What's remarkable about chairman Cook's comments is that he
can say them all without fear of loosing his job.  It's only
recently that trustees have not been selected completely by
government.  Only a few years ago,  trustees would not dare
to criticize their political masters.

Most public pensions are now administered by a joint
trusteeship - - a blend of employer and employee represented
trustees.  That makes sense when you consider that both pay
into the pension fund.

The Liberals claim that they had to increase medical service
premiums "in response to health-care costs that were out of
control," says Richmond in a subsequent letter to KDN. 
Compared to other countries, Canada's health care costs are
very reasonable. 

Each of us paid about $2,500 for health care in 2000,
compared to the United States ($4,700),  France ($2,400) and
Australia ($2,300), according to the Romanow Report (p. 33,
all in U.S. dollars).  The main problem with health care is
declining revenue, not rising costs.  Spending has been
falling since 1993 due to a reduction in transfer payments
by then finance minister Paul Martin.

Trustees who represent workers bring a new sensibility to
pension boards.  They ask some  tough questions about the
goals of investment.  "Is it simply to do a better job in
maximizing returns?  Or is it to make more fundamental
changes in the financial system - - a system that up until
now has not had a worker-friendly agenda," says Larry Brown,
author of Money on the Line, Workers' Capital in Canada.

One troubling dilemma for trustees is investment in
corporations that profit from privatizing government
services.  These businesses make money by laying off workers
who were paid decent wages and replacing them with minimum
wage workers.  Investment in these businesses betrays the
very workers that the trustees represent.

Pension trustees have a legal obligation to maximize returns
on investments.  But when there is an equal choice between
investing in companies that exploit workers and ones that
are looking for solutions to environmental problems,  the
choice is easy.

Ethical considerations aside, pension boards are facing big
problems.  Canada's largest pension fund, Quebec's Caisse de
depot, lost $8.55 billion in 2002.  That meant a loss of
9.57 per cent of depositors' assets and the worst annual
performance in its history of the fund.

The Ontario Teachers Pension Plan (OTPP) lost $1.4 billion
in its investment portfolio, a return of negative 2 per
cent.

B.C.'s Public Service Pension Plan last year looks
relatively good.  But even that is source for confusion. 
Richmond says the growth last year was 3.7 per cent.  Cook
says that it was 8.5 per cent.  Who is right?  Both are. 
Cook is referring to a five year average ending in 2002. 
Richmond refers to only that year.

Cook is concerned with the long term health of the pensions
plan.  Richmond is making a political point. It's important
to understand that even when the stock market takes a dive,
pensions are guaranteed.  If necessary, workers and
employers will pay more into the plan to cover pensions.

Pension benefits are not guaranteed, however.  The Liberals
have put more downward pressure on benefits by forcing public
servants into retirement.  As a result, there are more
retirees and fewer contributors.

There is enough confusion to spread around.  Pension boards
must maximize profits while investing ethically; complex
pension statistics are hard to interpret; and governments
don't seem to understand the cause and effect relationship
of their actions.

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