Q & A

How does our teachers' pension plan compare to others in Canada?

Charles Hyman

Question: For many years I have heard that our ATA pension is very good. I would, however, like to compare our pension plan with other pension plans in Canada. First, what would the teachers' pension be for a teacher that has reached an age of 55, has 30 years of teaching time, has $55,000 as the average of the best five years for (a) Alberta, (b) Ontario, (c) British Columbia and (d) Saskatchewan? Second, what are the teachers' contributions amount annually to the pensions for the four provinces at a base salary of $55,000 for the 1999/2000 school year?

Answer: The second part of your question is easier to answer. A teacher who earned $55,000 gross salary in school year 1999/2000 would have contributed the following pension premiums:

  • British Columbia $3,561
  • Alberta $5,534
  • Saskatchewan $4,198
  • Ontario $4,293

Contribution rates for pension plans are unique to each plan and are dependent upon things such as the plan design (benefits for which participants pay and obtain upon retirement), plan membership (number of participants, age, experience and other factors) and plan liabilities. This latter factor is now the reason for Alberta's high contribution rate. Under the terms of a Memorandum of Understanding reached in 1992 between the Government of Alberta and The Alberta Teachers' Association, the unfunded liability of our pension plan (now $4.5 billion) will be discharged over the next 60 years. Government pays two-thirds of the associated cost and teachers the remaining one-third. Prior to this arrangement, Alberta teacher contribution rates were lower than those in the comparison pool and, arguably, lowest of all teacher plans in Canada. In 1975, for example, Ontario teachers were contributing between 6.2 and 7.0 percent of salary. The corresponding rates for Alberta were 3.5 to 5.0 percent.

The first part of your question compels a qualified answer because the benefits of the various pension plans are not strictly comparable. In addition, comparisons at a single age, identical salary and experience are only a snapshot of the pension that will be in-pay over a lifetime. It tells you nothing about the bigger picture. I will try to include some of the bigger picture factors in the remainder of my response.

Based on a best five-year average salary of $55,000 and a 30-year service record, the annual pension payable at age 55 would be as follows:

  • British Columbia $28,050
  • Alberta $26,408
  • Saskatchewan $33,000
  • Ontario $33,000

However, at age 65 this same individual will receive:

  • British Columbia $20,316
  • Alberta $26,408
  • Saskatchewan $25,310
  • Ontario $26,408

The differences are attributable to a "bridge" benefit built into the British Columbia, Saskatchewan and Ontario plans to recognize that the Canada Pension Plan is not payable until age 65. When teachers in the three other provinces reach age 65, they lose the bridge benefit and their pensions are lowered by this amount. The Alberta pension plan contains no bridge benefit. Thus, the pension remains constant except, of course, for inflation adjustments (indexing) which also contributes significantly to the bigger picture. British Columbia pensions are indexed to inflation to the extent that a supplementary fund can support it from time to time, Alberta indexes at 60 percent of Alberta CPI for pre-1992 service and 70 percent thereafter (no maximum), Saskatchewan indexes at the lesser of two percent or 80 percent of CPI (effectively, nothing greater than two percent beyond a 2.5 percent inflation rate) and Ontario provides CPI up to eight percent.

There is also the teacher who chooses to retire before reaching the age plus service index of 85. In British Columbia, the index is 90 and the early retirement reduction is from three to five percent per year. Alberta has the lowest reduction at two percent, Saskatchewan's reduction is six percent per year short of age 65 and Ontario is currently operating under a three-year 85 index "window" similar to Alberta. This opportunity to retire early is, for the moment, an exception to an age plus service index of 90, with a five percent per year or 2.5 percent per "point" reduction prior to age 65.

Finally, if you were disabled in Alberta since 1992, you were able to accrue pension benefits without making contributions. Other provinces would have required you to purchase pensionable service.

Questions for consideration in this column are welcome. Please address them to Charles Hyman at Barnett House.