Saint John employees and retirees packed council chambers Monday night, while dozens more spilled out into the lobby. (Connell Smith/CBC)

Saint John city employees are vowing to lobby the provincial government to keep cost-of-living increases in their pensions after council voted unanimously Monday night to stop indexing the employees' pension plan to the inflation rate for both active workers and retirees.

Retired police officer Kevin MacDonald contends the city is breaking faith with its employees.

"When you give me something and shake my hand, to me, my dad, my family, and a lot of men that I've met, that's a contract," he said. "My hand's a contract, and live by it."

The changes to indexing are part of a package of reforms approved by council, which will mean less money for the city's 1,600 workers and for retirees.

The controversial package is designed to try to rein in a $163-million deficit to the fund.

Cutting indexing for current employees and suspending indexing for retirees until the fund is fully recovered is expected to reduce by deficit by $75 million.

The package also calls for an additional $7 million annually in city contributions to the fund.

'For 35 years I was told that you will have a pension. It will be indexed. And the word 'grandfathering' was always there.'—Kevin MacDonald, retired police officer

The package must be approved by the provincial legislature before the reforms can be implemented.

None of the city's union or non-union employee groups have signed off on the plan.

"For 35 years I was told that you will have a pension. It will be indexed. And the word 'grandfathering' was always there," said MacDonald.

More than half of the retirees make less than $30,000 a year from their city pension.

Council members contend it was a difficult decision, but they had little choice.

"This appears to be about the only option that we have available to us," Coun. Chris Titus told a public gallery packed with grim-faced city workers during Monday night's meeting.

"This council is left with a tough decision and the province is left with a tough decision. But we have to make it because we have to make this pension plan sustainable," agreed Coun. Bruce Court.

The only other options to deal with the deficit would be major service cuts, or a tax hike of well over $200 a year on an average home, city officials have said.

Mike Meehan, the head of the outside workers union, said the focus will now shift to Fredericton.

"The province plays a big role here," he said.