Skip to main content

The Globe and Mail

Ontario teachers' pension benefits 'have to be cut, ' Duncan declares

Ontario Teachers' Pension Plan Head Office in Toronto.


The pension fund for Ontario's teachers is $9.6-billion in the red, and the province wants to fix the shortfall by cutting benefits, not hiking contributions.

The heavily indebted province is seeking to shift the onus for solving shortfalls away from taxpayers as part of its plan to put its finances back on a solid footing.

The move is part of a trend in which governments are taking steps to make pensions more sustainable as low interest rates and aging populations threaten retirement funds. Beyond Ontario's public sector plans, that includes proposed federal changes to Old Age Security, and potential reforms to MPs' pensions.

Story continues below advertisement

"We are saying benefits have to be cut," Finance Minister Dwight Duncan said in an interview on Tuesday after the new shortfall was announced. "We are not agreeing to contribution increases."

The idea of decreasing the degree of inflation protection for teachers' pensions is already on the table, but Mr. Duncan suggested that the measures might have to go further, citing the formula that allows teachers to retire with a full pension when their age plus qualifying years add up to 85.

"A change in age plus years of service – you could change that and get fairly substantial savings, but the province is not in a position to raise contributions," he said.

Up until now, when the pension fund needed solvency relief, the default mechanism was first to increase contributions (the province matches what teachers put in), and cut benefits second. The province said in the budget that it will be introducing legislation to reverse that.

While contribution increases would still be possible, Mr. Duncan clearly suggested in the interview that they are off the table.

The funding shortfall that existed as of Jan. 1 happened despite recent contribution increases, benefit cuts, and solid investment returns.

Ontario Teachers' Pension Plan CEO Jim Leech emphasized to reporters in a press conference on Tuesday morning that the plan is still 94 per cent funded.

Story continues below advertisement

"This is not a crisis," he said. "This is our 10th year that we have faced a preliminary deficit."

The plan's sponsors – the Ontario Teachers' Federation and the provincial government – are required to bring the plan into balance every few years. They did so last year, solving a deficit of more than $17-billion, and are not required to do so again until 2014. However, the government has signalled that it would like to tackle it this year.

The teachers' federation declined to comment on Tuesday.

Mr. Leech said he thinks both the government and the teachers' federation would like to deal with demographic challenges to prevent shortfalls in future years. The plan has been paying out more in benefits than it has received in contributions since the end of the 1990s. Teachers work on average 26 years and collect a pension for 32 years.

The rules of the plan currently allow the sponsors to increase contributions to 15 per cent of salaries (contributions are already scheduled to rise to 13.1 per cent), with those contributions matched by government, or to decrease some of the guaranteed inflation protection.

But doing both of those things "would not quite cure this deficit," Mr. Leech said.

Story continues below advertisement


Report an error Licensing Options
Comments are closed

We have closed comments on this story for legal reasons. For more information on our commenting policies and how our community-based moderation works, please read our Community Guidelines and our Terms and Conditions.

Combined Shape Created with Sketch.

Combined Shape Created with Sketch.

Thank you!

You are now subscribed to the newsletter at

You can unsubscribe from this newsletter or Globe promotions at any time by clicking the link at the bottom of the newsletter, or by emailing us at