The mission-critical priority of Financial Advisors is to help their clients achieve financial security and the peace of mind that comes with it. Globalization, ultra-low interest rates, inflation, aging demographics, low savings rates and more, all represent risks that threaten the financial futures of Canadians and keep Financial Advisors up at night. The attached article from today's Globe and Mail highlights another risk that has been given little attention. Specifically, it identifies the risk to Defined Benefit Pension Plans (DBs) that up to now, have been seen as untouchable. Proposed legislation would allow employers -including those in the federal Public Sector to move employees from a DB plan which is guaranteed by the employer, to a Target-Benefit (TB) pension plan where the financial risk is shared by both the employer and employee. In simple terms, pensions that may not deliver a guaranteed income stream throughout retirement.
Federal Finance Minister Bill Morneau summarized the logic underpinning Bill C-27 which proposes the changes from DB to TB pensions plans as follows: "This is a public-sector problem. Who believes that the average Canadian without a Defined Benefit (DB) plan ...will over the long term, agree to fund public-sector employees pensions at a level that they can only dream about attaining themselves?" For Canadians in the private sector who have no taxpayer backed pension, Bill C-27 won't affect them, as they have to rely on their personal savings (RRSPs, TFSAs etc.) for their financial well-being in retirement. But for those in the public sector who have only known a world where the taxpayer is on the hook for their pension in retirement, this article should be a wake-up call. Economic reality affects us all, and the pensions that public sectors employees have believed to be a sure thing, may not be.
Real financial security results from basic principles: Systematic savings, compound growth, tax deferral, time and debt elimination. Oh, and living within one's means (an old fashioned idea) is also required. And towards these goals, we are firmly committed to helping our clients achieve financial security and their peace of mind. Thank you for your confidence and your trust.
Please click here for the Globe and mail article: http://www.theglobeandmail.com/report-on-business/labour-group-decries-ottawas-proposed-pension-policy-changes/article33077356/