by Les Robb, your Representative to the Pension Trust Committee for the Salaried Pension Plan

Notes from the presentation to the 2009 AGM

This is a very brief report to update members. I want to talk about indexing and about pension security, the two questions I am asked about most often. First, a reminder of the good news: As you all know, we received a pension increase in January 2009 - in fact, an increase above the inflation rate. We received this increase, even when financial markets were tumbling, because of the backward looking nature of our indexing formula.

Second, the bad news. As you all know markets have been terrible since last summer. The big loss by our plan will surely mean no increase next January (the history of the previous years was simply not good enough to compensate for this year), and it is unlikely we will receive an increase for a few more years.

I have written on the indexing formula in past issues of MURAnews and if you want more details, check the Summer 2008 and Winter 2009 issues of MURAnews.

The other issue I want to mention is the issue of threats of lost or reduced pensions because of the difficulties in the financial markets. There has been much discussion of such matters in the press and it is not surprising that individuals have concerns about their pensions. These threats to pensions are mainly in the private sector and in particular in companies that have gone or are about to go into bankruptcy and will not be around to make up any funding deficit of the plans (if the plans were fully funded there would be no problem even with bankruptcy). As well, there are individuals in money purchase plans which have taken a big hit in the market. Individuals who have not yet taken an annuity will be concerned that they will end up with substantially less than they had planned on in retirement.

However, our defined benefit McMaster pensions are, in fact, very secure, and unless you think there is a chance McMaster will be pushed into bankruptcy you should not worry about the security of your pension.

It is the case, however, that the poor market performance creates difficult times for McMaster University. The Salaried Pension Plan is in deficit and McMaster has to make up the deficiencies. That puts considerable strain on an already tight budget. Your colleagues who continue to work are in for difficult times over the next few years, I suspect.