The payout formulas for defined-benefit (DB) pension plans, such as those typically provided to government employees across Canada, produce little-acknowledged yet striking inequities, according to a report from the C.D. Howe Institute. In Winners and Losers: The Inequities within Government-Sector, Defined-Benefit Pension Plans, Geoffrey Young shows how plan formulas can produce redistribution of retirement income among members and recommends potential reforms.
The report shows that typical DB plans systematically transfer income away from employees in occupations with slow wage growth, to employees in occupations or careers with higher wage growth rates. In practice, this often means high-income deputy ministers do better by the system than do low-income clerks.
