Personal Finance

Envy of government worker's pension?

  • Last Updated:
  • May 3rd, 2016 5:12 pm
[OP]
Member
Dec 12, 2011
203 posts
224 upvotes
Toronto

Envy of government worker's pension?

Hi RFD,
For those of you are that retired or close to retirement, do you feel any envy towards the pensions those in the public sector have? If you could do it over again, would you look for a career in the public sector? Does it bother you that your taxes will be used to fund the pension plans of these retired employees? Any input would be appreciated.
76 replies
Deal Addict
Feb 22, 2013
1053 posts
928 upvotes
Salaries for government work bees are a lot lower than the private sector so they get little now for a good pension in the future. Don't know if there are any dual income government workers living in upper end neighborhoods.
Deal Fanatic
Nov 24, 2013
6214 posts
2967 upvotes
Kingston, ON
Many tend to forget when public service pensions come up that the workers make a significant mandatory contribution to the pension plan out of their salary. Up to the CPP YMPE, existing federal public servants are now paying 9.05% of their salary into the plan, and beyond YMPE they're paying 11.04% in. Put those percentages of a private sector salary into an RRSP, and you can end up with a pretty good annuity too.

I realize contribution rates weren't always this high, and there's the whole shell game of salary level vs. employer/employee shares of pension contributions when it comes to overall compensation. Still, if we look at it from today's perspective, the pension comes from high forced savings.
Member
Apr 20, 2004
392 posts
4 upvotes
GTA
clydelee2020 wrote: Hi RFD,
do you feel any envy towards the pensions those in the public sector have? would you look for a career in the public sector? Does it bother you that your taxes will be used to fund the pension plans of these retired employees?
No, No, no.
eat
drink
sleep
repeat

Member
Jan 20, 2007
470 posts
123 upvotes
Niagara
I'm not 100% sure this is accurate but I recall someone saying that when you die your spouse only gets 50% of the payments and when the spouse dies it's done. In other words there is no inheritance to give your kids .. at least as far as the pension is concerned. If that is true I'd rather have a RRSP and other savings. Imagine working 35 years and then dying 5 years afterwards .. all that money gone that can't be included in your estate...
Newbie
Oct 20, 2011
81 posts
67 upvotes
TORONTO
sparkaction wrote: Salaries for government work bees are a lot lower than the private sector so they get little now for a good pension in the future. Don't know if there are any dual income government workers living in upper end neighborhoods.
I don think so.

Gov't workers get paid more and work less than the private sector according to a study a few mths ago:
http://www.ctvnews.ca/canada/private-se ... -1.2292650
Deal Addict
Aug 31, 2014
1494 posts
542 upvotes
YVR, BC
clydelee2020 wrote: Hi RFD,
For those of you are that retired or close to retirement, do you feel any envy towards the pensions those in the public sector have? If you could do it over again, would you look for a career in the public sector? Does it bother you that your taxes will be used to fund the pension plans of these retired employees? Any input would be appreciated.
my wife is in the public sector gets paid much less for the same type of job and is envious of those in the private sector........her main issue is that the public sector generally works to reward productivity with upward mobility and wages as a motivator, while the public sector stifles in endless bureaucracy etc I have a better health plan in the private sector compared to my wife and my wages much better - however it is up to me to invest 20% of my much higher income for retirement purposes whereas she is forced into a defined pension plan who deducts her pension contributions from her pay.

Talking with her she would have prefered to stay in the private sector, it doesn't bother me that the government which is a employer has some costs to having employees just like the company I work for does, the feds get a bad wrap but my experience is they manage the rank n file public service wages and benefits quite well.
Deal Addict
User avatar
Mar 3, 2005
1038 posts
746 upvotes
Mississauga
I think it depends on the person and the job.

There are many in public sector positions (especially in non-union positions) that work many unpaid extra hours.

PHT
Deal Addict
User avatar
Nov 10, 2005
2031 posts
314 upvotes
Ottawa
sparkaction wrote: Salaries for government work bees are a lot lower than the private sector so they get little now for a good pension in the future. Don't know if there are any dual income government workers living in upper end neighborhoods.
I guess it all depends on who you know. I know many government employees that are living with dual-income living in rather nice neighbourhoods especially here in Ottawa. When both employees are bringing home about 90-100k each per year, you have quite a nice life.
RFD 15 73H 1337
Sr. Member
Jan 31, 2016
744 posts
419 upvotes
Kawartha Lakes
ancodia wrote: I'm not 100% sure this is accurate but I recall someone saying that when you die your spouse only gets 50% of the payments and when the spouse dies it's done. In other words there is no inheritance to give your kids .. at least as far as the pension is concerned. If that is true I'd rather have a RRSP and other savings. Imagine working 35 years and then dying 5 years afterwards .. all that money gone that can't be included in your estate...
The gov. pension I am familair with pays the surviving spouse 66%. Once the spouse passes that is it.

If there is no spouse the beneficiary(s) would get the employee contributions, plus interest minus any pension paid.

It seems to be more common now that employees are taking the cumulative value at retirement and re investing it themselves.
Sr. Member
Dec 1, 2003
528 posts
161 upvotes
Ottawa
Jealousy is a disease of the heart and could lead to health problems. Be grateful for what you've and strive for the best.
Deal Addict
Feb 6, 2014
2016 posts
449 upvotes
St. Johns
ancodia wrote: I'm not 100% sure this is accurate but I recall someone saying that when you die your spouse only gets 50% of the payments and when the spouse dies it's done. In other words there is no inheritance to give your kids .. at least as far as the pension is concerned. If that is true I'd rather have a RRSP and other savings. Imagine working 35 years and then dying 5 years afterwards .. all that money gone that can't be included in your estate...
This is what happens where I work (local government). Basically if I die my spouse would get my pension. If she passes before me, and assuming I don't remarry, then my pension disappears when I pass (no matter what age). My kids would see none of it.
Deal Addict
Aug 31, 2014
1494 posts
542 upvotes
YVR, BC
RyanS219 wrote: This is what happens where I work (local government). Basically if I die my spouse would get my pension. If she passes before me, and assuming I don't remarry, then my pension disappears when I pass (no matter what age). My kids would see none of it.
I would be interested in what the percentage is of unclaimed pension benefits where the contributor dies early, no spouse, no kids etc they always make it seem like the contributors and their dependants live until 100 where it is more likely that males die in their mid 70's or earlier etc

In the fed plan the spouse receives 50% of the contributors pension and dependant children receive 10% each to a max of 40% until age 25 or in school
Deal Addict
Apr 13, 2015
1108 posts
214 upvotes
ancodia wrote: I'm not 100% sure this is accurate but I recall someone saying that when you die your spouse only gets 50% of the payments and when the spouse dies it's done. In other words there is no inheritance to give your kids .. at least as far as the pension is concerned. If that is true I'd rather have a RRSP and other savings. Imagine working 35 years and then dying 5 years afterwards .. all that money gone that can't be included in your estate...
If you're concerned about leaving an estate for your kids, don't count on the RRSP. Almost one half of my mom's RRSP disappeared in income tax at death. An RRSP is great if you live long enough to spend it and enjoy it, otherwise you're throwing away money. I think she actually suffered a net loss on the RRSP despite benefiting from the tax deferred growth and deductions on earned income.
Deal Expert
Aug 2, 2001
16886 posts
7179 upvotes
Government workers do not get things like profit sharing, stock options and yearly bonuses. Most people seem to forget about these things when complaining about the benefits that government workers have.
Deal Addict
Aug 19, 2013
2397 posts
1080 upvotes
TrevorK wrote: Government workers do not get things like profit sharing, stock options and yearly bonuses. Most people seem to forget about these things when complaining about the benefits that government workers have.
I find those complaining are often the people who don't put anything into traps. If they put away the same % of their pay that gets deducted of the government workers cheques they would have a nice retirement too. Oh and the money wouldn't be lost when they die.
Sr. Member
User avatar
Jan 14, 2007
569 posts
190 upvotes
GTA North
TrevorK wrote: Government workers do not get things like profit sharing, stock options and yearly bonuses. Most people seem to forget about these things when complaining about the benefits that government workers have.
From what I've seen a lot of Private sector workers do not get things like profit sharing, stock options (would need to be public) and the yearly bonus is not the huge amount RFD's brag about if they get one at all. Maybe if they work for multinational or big bank but not regular company.

Edit - and these same small companies do not have a pension which is why the Ont Gov feels the need to make it manditory
Member
Mar 5, 2013
497 posts
118 upvotes
Ottawa
ancodia wrote: I'm not 100% sure this is accurate but I recall someone saying that when you die your spouse only gets 50% of the payments and when the spouse dies it's done. In other words there is no inheritance to give your kids .. at least as far as the pension is concerned. If that is true I'd rather have a RRSP and other savings. Imagine working 35 years and then dying 5 years afterwards .. all that money gone that can't be included in your estate...
You forget that unlike an RRSP, a pension is a *guaranteed* income, and part of that income is paid directly to the retiree from current contributors to the plan. No one is entitled to that portion of the pension who wasn't an employee (and their spouse).

On the other hand, when a retiree dies, any money left from his contributions up to that point goes to his estate if there's no surviving spouse. The retirement expert I consulted said that after 5 years on a pension, that pot of money has dried up though.
Deal Addict
User avatar
Apr 19, 2007
1775 posts
299 upvotes
Fed public service pensions also get clawed back dollar for dollar once you are eligible for CPP/OAS

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