Retired teachers won't get pension increases 'for many years,' AG warns
Michael Pickup wants government, teachers to formulate plan to deal with $1.4B deficit
Nova Scotia's auditor general is painting a dark picture of what retired teachers, and those who soon will be, can expect if their pension plan continues to run a huge deficit.
The plan currently has a $1.4-billion deficit, which means many pensioners are not eligible for increases tied to cost of living nor, according to the auditor general's office, will they be "for many years to come."
Auditor General Michael Pickup told the legislature's public accounts committee Wednesday he wanted to ensure those who are counting on their pensions know where they stand. He said that is particularly important for teachers planning for the future.
"To drive home the point to teachers, to say: 'We sure hope you're aware that if you're going to be retiring any time soon you may go a long time — if not your complete retirement — without an increase to your pension plan,'" he said. "Which hopefully they are considering in their own personal sort of financial planning."
The office of auditor general examined the province's three largest public-sector pension plans in its latest report, released Wednesday morning.
While health workers and civil servants have healthy pension plans with large surpluses, the teachers' plan continues to struggle to dig itself out of a deep financial hole. That's despite efforts in recent years to beef up the plan.
Those efforts include $50 million in special payments by the province, a 33 per cent increase in contributions by teachers. There is also a freeze on indexation until the plan is 90 per cent funded, which means payments to retired teachers will not increase each year with inflation.
The plan is currently 77.7 per cent funded, roughly where it has been the last four years.
To illustrate the practical effect of the freeze on pension increases for teachers, the report projects pension payments out 10 years for all three pension plans based on an assumed indexation rate of two per cent for health workers and 0.85 per cent for civil servants.
For retired workers currently earning a $42,000 pension, the health worker would receive $9,000 more in 10 years. The civil servant's pension cheque would increase by $4,000 and the teacher's pension would remain the same.
Pickup urged both parties responsible for contributing to the plan to come up with a way to lower the deficit.
"I would hope that the teachers and the government can work together and have a plan as to how they are going to deal with this significant deficit that is a risk for current retirees and teachers who will retire in the future," he said.
There are currently more retired teachers drawing from the plan than teachers contributing to it. According to the auditor general's report, there are 13,165 retired teachers and 12,832 future retirees.
The plans for civil servants and health-care workers each have more contributors than retirees.