Three ways DB pensions benefit more than just members

You already know that Defined Benefit (DB) pensions are great for members, but did you also know that DB pensions have a positive impact on the Canadian economy? Here are three ways that DB pensions benefit more than just members.

1. Predictable and steady income in retirement means: reduced pensioner poverty, less reliance on social programs, and funds injected into the Canadian economy.

When people retire with a DB pension, they have a predictable and secure income for life, and are less likely to succumb to poverty than those who rely solely on government benefits.

Seniors with meaningful retirement income are less reliant on federal social programs, such as the Guaranteed Income Supplement. This reduces the burden on health and education programs.

With a predictable and reliable source of income, DB pension retired members inject funds into the Canadian economy through spending. Further retired DB plan members provide government with a source of revenue from the taxes collected on pensions in payment. In Canada, retired members of DB pension plans spend over $60 billion in goods and services, and pay between $14 - $16 billion in taxes each year.

2. DB pension plans are institutional investors, pumping billions of dollars into the Canadian economy.

The 10 largest pension plans in Canada have invested billions of dollars in Canadian assets, and the CAAT Plan’s pension fund includes assets that are prudently invested in Canadian infrastructure, private equity and real estate, supporting Canadian economic growth.

Pension plans like the CAAT Plan are long-term investors, with time horizons that are decades in the future, offering a stable source of long-term capital. While pension assets are being accumulated for future pensions, they are available for investments like Government bonds, which fund important initiatives, and infrastructure development, which benefits society in a number of ways. Ontario needs infrastructure development, and pension plans are helping fund infrastructure programs.

3. Employers get value from jointly sponsoring a defined benefit plan: not only are they seen as model employers, but they get great attraction and retention benefits and a more productive workforce.

DB pension plans help employers manage their workforce – employers with DB pensions don’t see the peaks and valleys of retirements as a result of market cycles: members can retire at the right time for them, not just when the market is favourable. This is a positive impact for employers – for employees dependent on account balance-type retirement savings, the incentive to stay at work during down times is high, as is the possibility of mass retirements during market up-cycles.

DB Pensions positively affect productivity – stress and worry about retirement and investments can cost as much as an hour a day of productivity, and can have a negative impact on employees’ lives.

In a competitive job market, employers that can offer a valuable compensation package that includes a DB pension with the possibility of early retirement, survivor benefits and inflation protection have the best chance of attracting talent.