Working Pension System and Finding Pension Solutions To Inter-generational Risk and Fairness
Public employee pensions are under the microscope. Some in the media and government continue to unfairly cast defined benefit pension plans as unsustainable, but, here in New York, that storyline just doesn’t hold water. Our pension fund is strong, secure and sustainable State Comptroller: “All public pension systems are not equal. The advantage we have in New York is that we have a well-funded, strong public pension system. Our investments continue to do well.
In fact, the New York State Common Retirement Fund is as strong as it has ever been, and is now valued at more than $160 billion dollars. We have regained the historic losses sustained during the Great Recession and then some, but these past few years have not been pain-free. Contribution rates rose significantly after the market collapse at the start of the Great Recession, and the rates that we charge our employers are certainly higher than we’d like them to be. The good news is the rates are starting to decrease. Depending on market conditions, I certainly hope and expect that that trend will continue downward.
Some critics suggest moving workers out of defined benefit pension plans and into individual retirement accounts, but, time and again, Comptroller has said, “not on his watch” “Dollar-for-dollar, defined benefit plans are more cost-effective, and certainly do a better job of providing retirement security 401k-style plans come with a greater cost. There’s greater risk involved, and I think we need to keep in mind when retirees are secure, with the pension that they’re receiving, and, with their economic security, they’re more likely to stay in the state, live in the state, and spend their money in the state, recycling billions of dollars back into our economy”. Due to misleading reports in the media, you may think that every state and local retiree gets a huge pension payout, but here are the true statistics: For all the tales of bloated public pensions, less than one percent of retirees receive $100,000 per year or more.
The average pension is under $21,000 per year. Sixty-eight percent of retirees receive less than $30,000 annually, and one in seven retirees (roughly 55,000) receive less than $5,000 a year “I’ve instituted a series of reforms to ensure transparency and accountability in the management of the pension fund. The fund is safe and secure, and we’re working each and every day to keep it that way for our current retirees, and those working men and women who look forward to being retirees in the future.
Finding Pension Solutions to Inter-generational Risk and Fairness
Over the past number years, I’ve been quite frustrated by the tone of the debate and even the subject.
It’s spiraled down into a discussion of defined benefit or defined contribution, you have to be one or the other, or a discussion about gold-plated public service pension plans and ‘I want to tear that down’ and we will all spiral to the lowest common denominator.
It has frustrated me because the real issues that we’re facing are the fact that
- Canadians are not saving sufficiently for their retirement years.
- In addition, we’re facing a demographic shift here where people are living far longer and in retirement far longer than even their working years.
- Then finally we have a dramatic change in the investment environment such that we cannot count on the returns that we got, say, two decades ago.
Layered on top of that is this tsunami of about 40 percent of our workforce about to retire to migrate from employment to retirement in the next couple of decades. I wanted to get the debate, and Jackie and I joined together to try to get the debate, on to that level as opposed to this futile debate between DB DC and tearing down public sector pension plans. We wrote the book. It’s dedicated to or aimed at intelligent people who are confused and perhaps frightened about even talking about this subject. They’re confused because it seems to be the purview of the accountants, the actuaries, the economist, etcetera, and yet this is a people issue. This is an issue that deals with inter-generational risk, inter-generational fairness and it needs to be solved by getting everybody around the table to come together to find the least painful, but the most successful way that people can save for their retirement.