Canada's two-tier retirement /

The Pension Predicament Almost 80 per cent of Canadians are employed in the private sector and two-thirds of them do not participate in an employer-sponsored registered pension plan.2 Organizations in the private sector are increasingly moving away from guaranteed pension plans and are instead offering other retirement savings vehicles such as a defined-contribution pension plan or a Registered Re [...] The other 20 per cent of Canadians work in the public sector and 87 per cent of them are offered an employer-sponsored pension plan.3 Most of these plans are defined-benefit pension plans, meaning they guarantee the pension benefit (indexed to inflation) that a person receives during retirement, regardless of contribution levels or the financial health of the plan. [...] Pension Inequity between Public and Private Sectors To better understand the pension inequity between the public sector and private sector, the following scenarios examine the estimated retirement benefits of two workers. [...] The pension gap between public and private sector The differences in the retirement savings options and the vast discrepancies in retirement income are a good reflection of the growing gap between public and private sector (Figure 1). [...] The golden rule used in the public sector is that a worker’s pension has to be equal to about 70 per cent of the average of their best paid five years of pre-retirement income.