By Doug Hallett
The huge pension fund that covers Ontario’s municipal employees is pushing back against a critical campaign launched against it last week by an Ontario group called Fair Pensions for All.
The average pension being paid out by the Municipal Employees Retirement System to municipal employees who retired last year is $28,000, and the average OMERS pension for all 100,000 of its retirees is $18,000, OMERS vice-president of public affairs John Pierce said Tuesday.
“To say they (OMERS pensions) are gold-plated is kind of silly,” said Pierce, who contacted the Tribune about a front-page story in Tuesday’s edition.
The accusation that OMERS is an unaffordable “gold-plated” pension plan came from Sue Ricketts, a financial planner who ran for council in 2010 and now is the local spokesperson for Fair Pensions for All.
“I think to some extent it is public sector bashing,” Pierce said when asked about his view of the motivation behind Fair Pensions for All’s campaign.
Along with the 100,000 retirees, OMERS has 260,000 active members earning an average of $63,000 a year, he said.
It also has 40,000 “deferred or inactive” members who aren’t currently working in OMERS jobs but have pension money in the OMERS pension fund.
Employees generally earn a 2% credit towards their pensions for every year they work in an OMERS job, Pierce said. This means that if they work 35 years in an OMERS job, they can collect a pension amounting to 70% of the average of their best five years of earnings.
However, he said, the average OMERS pension amounts to 30% to 40% of best earnings, reflecting the number of years retirees worked in an OMERS job.
Over the past 20 years, two-thirds of the money that has come into the OMERS fund has been from returns on investments, Pierce said. The other one-third has come from contributions, which are split equally by employees and employers.
“The real value (of OMERS) is the size, so you can get the assets that can drive those kind of returns,” he said, noting that OMERS invests in such things as big shopping malls, office towers and international investments such as a dozen British seaports.
Rather than criticize this sort of pension fund, more people should be trying to replicate the success of OMERS, said the Toronto-based official.
OMERS was hit hard by the recession that started in 2008, and its “actuarial deficit” is projected to grow to about $9.7 billion by the end of 2012. Municipalities, not the province, would be liable for any shortfall at OMERS, says local MPP Liz Sandals.
As part of its plan to gradually reduce its actuarial deficit to zero over the next 10 or 15 years, Pierce said, OMERS has temporarily increased its contribution rates – from both employers and employees – by 1% for each of the years 2011, 2012 and 2013.
OMERS is also striving to increase the percentage of its money in “privately owned assets” from the current 40% up to about 47%, he said. “That takes you out of the stock market roller coaster.”
The plan to eliminate OMERS’ actuarial deficit over the next 10 to 15 years assumes an average annual rate of return of 6.5% for the OMERS fund, Pierce said.
“While the past is no indicator of future success,” the average annual rate of return enjoyed by OMERS over the past 20 years has been about 8.5%, he said.