New Brunswick

Pension reforms for retirees not illegal, expert says

Retired civil servants have threatened to take the provincial government to court over pension changes, but a pension law expert doubts they'll be able to prove breach of contract.

New Brunswick government has authority to make changes to pension plan

Harry Forestell talks with James Pierlot; Lawyer,pension law expert, about the pension crisis. 6:30

A pension law expert says he doubts retired civil servants will be able to convince the courts that proposed pension changes in New Brunswick are a breach of contract.

"All contractual arrangements between employers and employees and retirees are governed by the Pension Benefits Act," said James Pierlot, who is based in Toronto.

"So the government does have the legal power to change how that functions. And indeed, to introduce shared-risk pension plans as it has done. So it that sense, no, there is no illegality here," he said.

Anger among pensioners has continued to grow this week as Finance Minister Blaine Higgs held a series of public meetings across the province to explain the changes.

Under the current plan, retired civil servants are sheltered by the provincial government from any risk of market downturns.

Under the reforms, however, the risk would be shared by both sides.

Guaranteed cost-of-living increases will also be eliminated for pensioners and instead, be dependent upon market performance.

Many pensioners have argued it's unfair for them to lose benefits they've already paid for.

Current employees hardest hit

Pierlot says it's understandable that retirees are upset about the changes, but they will be the least affected.

It is current employees who will bear the brunt of the new plan, he said.

"And the younger they are, the more modest their pensions are going to be going forward. They're facing later retirement ages, lower benefits, et cetera. Whereas any reductions or risks faced by retirees is considerably less."

Premier David Alward announced the government was overhauling the pension system last May, saying the current plan is not sustainable.

The new plan will see increased contribution levels and a higher age of retirement phased in. The targeted retirement age would be moved to 65 from 60 over a 40-year period.