Most Canadians save over their working career into a plan and what ever is in the plan a retirement becomes their retirement income. A public sector pension works on a completely different concept. It guarantees a certain level of income in retirement.
Definition
The Oxford dictionary describes the difference in the two plans well.
1) a regular payment made by a government to people above a specified age... or to such a person's surviving dependents - Public Sector pensions
2) a regular payment from a fund to which the recipient has contributed - private sector pensions
As a result of the different concepts pension apartheid is created. The public sector pension is designed to provide pensions based on 70% of income at retirement. A private sector pensions will payout based on what is in the fund at retirement.
The CD Howe report A Pension in Every Pot shows the impact of the two different ways of calculating "pensions".
Two Pensions Two Results
- A typical private sector workers retires with a fund valued at $ 255,000
- A typical public sector worker retires with a fund valued in excess of $ 1,200,000
