Public sector pension funds earn $830M
Returns won't change plans for pension reforms, human resources minister says
New Brunswick public pension funds made nearly $830 million in the markets last year, but Human Resources Minister Troy Lifford says that won't change the government's pension reform plan.
The financial assets of the civil servants', teachers' and judges' plans reached an all-time high of $10.1 billion as of March 31, 2013, up from $9.4 billion at the same time the previous year, according to the body responsible for investing the funds.
The investment earnings helped the pension funds stay ahead of their long-term financial obligations to pay for government employee retirements, New Brunswick Investment Management Corporation (NBIMC) president and CEO John Sinclair said in a statement.
"The annualized real return (after adjusting for inflation) since our inception is … continuing to exceed the long-term real return objective … that has been set out by each pension plan's independent actuary," he said.
Annual investment returns for the public service, teachers' and judges' plans were 9.1 per cent, 9.07 per cent and 9.09 per cent, respectively, said Sinclair.
The province's former pension chief and current pensioner Ernie MacKinnon says the returns prove the current model is working.
"It's working for the benefit of members and it's working for members of government, so we're pretty pleased," he said.
But pension reform is coming, big returns or not, Lifford told reporters on Wednesday..
"Government is still committed to making pensions more secure here in the province of New Brunswick, more sustainable for everyone involved and we'll continue to work on that road to pension reform for the benefit of all New Brunswickers," he said.
Finance Minister Blaine Higgs agrees.
"It really doesn't change any of the long-term view on the pension reform," he said.
Proposed shared-risk model
New Brunswick government pension funds have become a flashpoint of controversy for the Alward government, which is attempting to lessen its liability for the multi-billion dollar plans.
It has proposed switching them from a traditional defined benefit model to what it calls a European style shared-risk model.
The government says the current plans are too expensive and risky to maintain, but several hundred retired civil servants have turned out to public information sessions to protest and denounce any attempt to make them switch.
Under the current plan, the risk of any market downturns is borne by the provincial government alone. Under the reforms, 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.
The provincial government has said only in an extreme, depression-style crash would benefits be reduced. The system would also see those cancelled increases paid back to retirees later when the markets recover, officials have said.
The proposed model also includes increased contribution levels and higher age of retirement phased in slowly over a period of time.
Fourth year of strong returns
The latest public sector pension plan returns are the fourth strong financial year in a row, following heavy losses in the stock market meltdown of 2008.
That year, the funds lost $1.7 billion, about one-fifth of their value, forcing the province to inject hundreds of millions of dollars to keep them properly funded.
Since then, the funds have gained back $3.1 billion in value, including the most recent returns.
Several unions voiced early support for the new pension model, including the New Brunswick Union, the Canadian Union of Public Employees Local 1252 and the New Brunswick Pipe Trades.
The cities of Saint John and Fredericton have since adopted the shared-risk model.
New Brunswick has also hosted a national policy conference on the future of pensions.