A retired union pension expert says Finance Minister Blaine Higgs' promise to retirees this week won't cost the province any money.
In a letter sent to retirees on Monday, Higgs said their pension cheques will never be reduced under the shared-risk model. Higgs couldn't previously give that assurance, and retirees objected to the possibility of their pension benefits changing as a result of the provincial government's move to a shared-risk pension plan.
Raymond Leger worked on behalf of the Canadian Union of Public Employees (CUPE) during negotiations with the province, and said Higgs isn't really giving up anything with the new promise.
"That promise on the short-term basis could be kind of meaningless," he said, because of the low-risk nature of the plan's investments and the higher contributions from both government and workers.
Leger said he has a lot of faith in the new pension system, because it eliminates the risk that the fund would be unable to pay retirees their full pensions.
'We're telling you your pension you get today will never reduce. And it isn't a big financial impact because it never was a big risk.' - Finance Minister Blaine Higgs
"The plan is such that the probability of that happening is very minimal," he said.
"It's a better system to provide benefits on the long-term for the workers. On the one hand, you're putting in more money to cover the benefit in the plan, on the other hand you're lowering the risk on the market side of things.
"And in the long-term, that will produce a steady stream of revenue for pension plans in order to be able to provide the benefits that are established."
Pension Coalition wants more guarantees
Pensioners were previously told that under shared-risk, there was a 2.5 per cent chance that cheques would have to be reduced at some point in the future, and even then it would be temporary.
After seeing a ground swell of opposition among pensioners, Higgs softened his stance .
"Now we're telling you your pension you get today will never reduce," he said. "And it isn't a big financial impact because it never was a big risk."
Higgs said cost of living increases will also continue under the plan, stating that the model is designed to ensure retirees will receive at least 75 per cent of inflation going forward.
But Bonnie Hoyt-Hallet, chair of the New Brunswick Pension Coalition, said that is not guaranteed in the letter.
"He'll say, 'Oh well, the likelihood you're going to get the very same thing you got in the past is great,' so we say to him, 'If that's great, guarantee it.'"
The Alward government signaled during Tuesday's throne speech it plans to press ahead with pension changes and will introduce legislation this session.
The pension plan is currently facing a $1-billion deficit, which is expected to grow. The government wants to move to a shared-risk model so taxpayers don't have to top up the fund in years when it loses money.
Civil servants who have already retired have said they would fight any change in benefits in court, arguing it's not fair to change their benefits retroactively.
Under the current plan, retired civil servants are sheltered from any risk of market downturns by the provincial government with guaranteed cost-of-living increases.
Under the reforms, announced by Premier David Alward in May 2012, the risk would be shared by both sides.
The proposed model also includes increased contribution levels and higher age of retirement phased in slowly.