Unfunded liabilities of Canadian government pension plans totaled $227 billion as of March 31, about $80 billion more than was reported by the government, claimed a report released Tuesday by the C.D. Howe Institute.
The report, “Ottawa’s Pension Gap: The Growing and Under-reported Cost of Federal Employee Pensions,” stated that the calculations the government made in reporting $146 billion in liabilities as of March 31 “do not reflect investment returns in the real world,” according to William B.P. Robson, president and CEO of the institute, a non-profit think tank, and co-author of the report.
The government discounts future payments using notional interest rates, a moving average of past nominal yields on 20-year federal bonds, and an assumed return rate of 4.2% currently.
“Both these interest rates are well above anything currently available on any asset that matches the plans’ obligations,” Mr. Robson said in the report. “Any Canadian who does not work for the federal government and wanted a tax-backed, inflation-indexed pension would need to save far more money than these plans hold for his or her federal employee counterpart.”
The institute calculates its liability amount using the discounted real-return bond rate.