A story of Haves (Public Sector Worker) and Have-Nots (Public)

The Canadian Taxpayers Federation reports the federal public sector pension plan has created a situation where Joe Canuck would need to save $14,180 per year in his nest egg – every year for 35 years – to match that of a senior federal government bureaucrat pension.

Here’s the math using the example of an employee who starts working for the federal government at age 25, with an average salary for pension calculations of $100,000. Note that retired employees are paid a guarantee pension of 70% of the average of their highest five consecutive years of paid service – a pension that is fully indexed to cost of living adjustments. (Also note that earning $100,000 puts more than 42,000 federal bureaucrats in the top 2% of income earners in Canada.)

So, here’s that ugly math:

• Our federal government employee will retire at 60 with a pension starting at $70,000 per year, indexed for life. At age 81 (average life expectancy) he would be paid $135,099 that year and, over the period of retirement, he would be paid almost $2.4 million.
• Joe Canuck retiring on savings would require $1,014,200 in the bank at retirement, and a 5% annual return to receive $70,000 per year – with no indexed growth. To gain this retirement nest egg, Joe Canuck would have had to save $11,194 per year, every year for 35 years.
• To have enough to match the indexed figures of our federal public employee, Joe Canuck would have had to save a little more than $1.2 million through his working years. This nest egg would require one to save $14,180 per year, every year for 35 years – and hope to earn 5% every year in compounded interest (and not suffer any market correction!).

When you combine this pension information with the increasing wage gap between higher-paid public sector workers and similarly employed private sector workers (see Canadian Bureaucracy is “Out of Control” @ https://www.bygeorgejournal.ca/?p=1675 ), the picture becomes very clear that we are supporting a privileged class of bureaucrats!

Having just come through our RRSP season, I ask you, Joe Canuck, were you able to sock away $14,180 this year? How much to you plan on putting into savings over the next decade? Perhaps $142,000? If not, don’t sweat it; you’re keeping good company with the many Have-Nots outside of Ottawa.