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Canada’s two-tier retirement system

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Retirement in Canada is now a two-tier system, strongly favouring public sector workers. With millions of Canadians in the private sector having no workplace pension plan, even those with an employer-sponsored plan cannot hope to retire nearly as comfortably as government employees. 

Canada’s Two-tier Retirement, a CFIB report, offers a good illustration of the stark discrepancies in retirement benefits between private sector workers and their public sector counterparts. The report follows two fictional workers (Mary and Jane) with similar work roles and salaries, from when they start work. By the time they both retire in 2029 at age 65, Jane (private sector) will get about $605,000 in retirement benefits over 20 years, while Mary (public sector) will receive a guaranteed pension of $1.38 million, over the same period

The report touches on reasons for the estimated $776,000 gap, including massive contributions from Mary’s public sector employer (the taxpayer), and a defined-benefit formula that guarantees her benefits. While Mary contributes about 7% of her salary in order to enjoy these rich benefits, a private-sector worker like Jane would have to contribute about 21% to achieve a similar level of retirement.

Canada’s Two-tier Retirement is the fifth in a series of CFIB reports that examine the problem of unfair and unsustainable public sector pensions. Previous reports:Canada’s Hidden Unfunded Public Sector Pension LiabilitiesCalling in Sick: Comparing Days Away from Work in the Public and Private Sector and The Case for Ending Early Retirement in the Public Sector.