As if we don’t have enough to worry about with the recent economic slump, there are now growing concerns about the fate of corporate pensions.  A number of Canada’s largest companies are calling for the easing of funding rules on their pension plans claiming that current pension plans are placing unrealistic burdens on their operations at a time when cash flow is tight.  Not surprisingly, various labour groups and retirees are crying foul. The ensuing battle could have long-term repercussions for many pensioners. So what to do?

The type of pension plan that is causing the controversy is called a “defined-benefit” pension, affecting about 20% of corporate pensions. Under this type of pension, the retiree gets a fixed amount of income every month depending on their years of service and salary levels throughout their employment.  Air Canada, Canadian Pacific Railway and Bell Canada are amongst the corporations saying this type of “guaranteed” pension is unsustainable.  While the current economic downturn is making the pension funding situation worse, the reality is that many pension plans were under serious pressure long before now.

Companies, unions, governments, and CARP, the lobby group representing retired Canadians are all weighing in on the debate. Some are suggesting rule changes, others are fighting to retain the status quo, while still others are championing alternate pension models. While the battles rage, it is imperative that retirees and employees alike check their plans and follow the debates closely. Check on such important details as: inflation indexing; medical benefits at retirement; changes to employee contribution amounts; and changes to pension payouts. You should also check on the current financial health and long-term viability of your particular pension plan. After all, it is your money and your retirement that is at stake! – Karin Mizgala

Karin Mizgala is a Vancouver-based fee-for-service financial planner with an MBA and a degree in psychology. She’s the President of LifeDesign Financial and co-founder of the Women’s Financial Learning Centre.