She says you're on a bridge to nowhere and you're gettin' there fast
Put it in the past, put it in the past.
--Sam Roberts, "Bridge to Nowhere"
To go a little outside my comfort zone and borrow a catchy chorus from Canadian songwriter Sam Roberts, I'd like to see government pension bridge benefits put in the past.
If you work in the private sector, you may not know the term "bridge benefit," since your retirement in all likelihood will not give you this little-known feature.
If you're a government worker or you work in the public sector, chances are pretty good that you've heard of the bridge benefit, and you may well be celebrating your good fortune for having such a sweet deal in place for early retirement, one that other Canadians can only dream of.
Ordinarily Canadians who retire before age 65 and choose to draw CPP early receive reduced benefits for the rest of their lives. That makes sense as they will not have paid in as much in premiums. The bridge benefit allows many government workers to claim their full pension early, penalty-free. In most cases, it is roughly equal to the unreduced CPP/QPP benefit, and it is paid until age 65.
If this seems rather unfair, that's because it is.
The harsh reality is that the cost is borne by taxpayers, most of whom get no such benefit.
The Canadian Federation of Independent Business (CFIB) has just published a research snapshot breaking down some of the numbers of the bridge benefit across public pension plans in Canada. The federal government and most provincial public sector pension plans -- except Alberta, Saskatchewan and Manitoba -- offer the bridge benefit.
The perk also appears to be a financial incentive for government workers to stop working: 81 per cent of public sector workers retire before age 65, compared to 60 per cent of workers in the private sector, and fewer than half of self-employed people. No wonder it is civil servants who seem to be the largest group of younger retirees, wintering in Florida while the rest of us are hard at it.
The financial impact of the bridge benefit is put into stark relief when you consider that members of provincial and federal pension plans can retire as early as age 55.
It's expensive: the bridge benefit varies across public sector pension plans and falls in the range of $7,400 to $8,800 per worker, per year. In 2010 to 2011, about 55,000 federal civil servants received the perk at a total cost of more than $385 million.
The harsh reality is that the cost is borne by taxpayers, most of whom get no such benefit. And the cumulative economic effect of such perks is to create a bridge to underfunded pension plans and a stressed social safety net.
Some government organizations, including the Bank of Canada, have already seen the light, finding the bridge benefit to be unsustainable, and have eliminated it from their plans.
Governments across the country need to follow suit and move quickly to return sustainability and accountability to the public sector pension system. Commitments to current employees should be honoured, but this benefit should be phased out for those civil servants still far away from retirement.
In the context of an unfunded public service pension liability amounting to an estimated $300 billion as of 2012, it's even more critical than ever to bring government pensions in line with the rest of the working world.
Small business is calling for the end of the bridge benefit.
Play it again, Sam: "Put it in the past."
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