Public servants ‘concerned’ as feds redirect $2B pension sur…

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Canada’s largest federal public sector union says a government plan to redirect almost $2 billion in surplus funds from the public service pension plan into a central account has “failed workers.”

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On Nov. 25, Treasury Board President Anita Anand tabled a report in the House of Commons that showed there was a “non-permitted” surplus of around $1.9 billion in the Public Service Pension Fund as of March 31, 2024. Anand said the government plans to transfer the surplus to its Consolidated Revenue Fund — a central government bank account.

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Anand said in a statement that it will remain there “while next steps are considered.” However the surplus potentially could be used to pay down the government’s debt and the Public Service Alliance of Canada (PSAC) would rather see it reinvested in pension members and retirees.

“Federal workers built this pension surplus through their own hard-earned contributions, and taking these funds is a betrayal of their trust,” PSAC national president Sharon DeSousa said in the statement, noting that the union had presented a plan to the government for the surplus. “It also sets a dangerous precedent for all Canadian employers who may now be eying the pension contributions of other public sector workers.”

In a statement, PSAC said the surplus represented “a once-in-a-generation opportunity to invest in the future of Canada’s public service and right the wrongs of the Harper era.”

It said the surplus should be used to reverse what it calls an “unfair” two-tier pension system introduced in 2012 under then-prime minister Stephen Harper. The changes meant any public servants hired from 2013 onwards will have to work an additional five years before reaching retirement age.

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The union said it would oppose “any attempts to unilaterally allocate these funds.”

Anthony Pizzino, CEO of the National Association of Federal Retirees, said in an email that the organization was “deeply concerned” about the government’s decision to put the surplus in the Consolidated Revenue Fund.

“To the Federal Retirees, it means the Federal Government is gearing up to spend the funds our members have significantly contributed throughout their careers,” Pizzino said.

The government’s announcement to move the surplus comes at a time when it’s also looking to significantly reduce spending across the government, including through attrition, hiring freezes and potentially layoffs of permanent employees.

David Macdonald, a senior economist with the left-leaning think tank Canadian Centre for Policy Alternatives (CCPA), which released a report on pensions on Nov. 25, said it’s fair that public servants might be upset by the government’s decision given that the surplus is created by contributions from both the employer and its workers.

“Half of that money, in a sense, is the workers’ money that’s just going to be scooped and put into general revenues to pay for whatever the government wants to pay for,” Macdonald said.

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The CCPA report, which looked at the impact of pension income on Canada’s economy, found that, in 2025, pension incomes and retirees’ spending will contribute $24.5 billion to federal funds, with that money to help fund “vital public services.”

The government is required by law to take action of some kind with the surplus as the Income Tax Act limits the amount of surplus a pension fund can have. But Macdonald said that the way the government is moving the funds “didn’t have to be the choice that was taken” and that there were other options to get rid of the surplus.

“What you could do is use the workers’ and the employer’s money to improve the benefit,” Macdonald said. “That’s certainly another way that you could use it where workers’ contributions so far and the surplus created from those contributions goes to help other workers in the same workplace.

“Particularly when workers are footing half the bill, it’s best that the workers are the ones that benefit and that this isn’t just an accident of interest rates that means the government gets billions of extra dollars to spend on its priorities. It should be something that the workers have a big say in because half of it’s their money.”

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