March 9, 2010 News

Quebec’s pension system is broken

‘Pensions are not a sexy topic,’ says analyst

by Christopher Curtis

All of Quebec’s public employees are covered by a pension system facing record losses, while a record low number of Quebec’s private employees even have a pension. Reform is needed.
A panel of experts held a roundtable discussion March 2 on pension reform at Concordia’s Samuel Bronfman building. Pensions became an issue of public interest when the Caisse de dépôt et placement du Québec, the province’s public pension management system, posted record losses upwards of $39 billion in 2008.

“Pensions are not a sexy topic,” said Leo Kolivakis, an independent economic analyst. “But when you look at how badly the economic crisis hit pensioners, it gets sexier.”

The Caisse was created in 1965, but only set its first official mandate in 2005 under Jean Charest’s Liberals. The new mandate required that the Caisse seek “optimal” returns, prompting a widespread shift in the organization’s investment strategies.

Where the Caisse had previously looked to invest in Quebec, it now set itself to increasing its bottom line. Under the leadership of Caisse President Henri-Paul Rousseau, the Caisse investmented on inflated real estate, paper mills, hedge funds and other speculative ventures.

“Pension funds, such as the ones of civil servants and university endowment systems, provided money to vulture funds, to distress funds, to hedge funds to create this turbulence in the markets,” said former CDP Capital president Michel Nadeau.

Nadeau contended that the problem of under-performing pension funds is a luxury compared to the situation most Quebecers face.

“One hundred per cent of public employees are participating in the pension system. So don’t cry for the civil servant pensions,” said Nadeau. “Thirty per cent of the private sector is participating in the pension system. Most workers today will have to work until they are 70 or 75 years old. That’s the real challenge for our generation.”

Both Nadeau and Kolivakis agreed that all Quebecers should be covered by a government-run pension plan. The pair also advocated further reform to the current pension system.
“Workers need better representation on the board of directors of their pension funds,” said Kolivakis. “If you’re going to invest money on behalf of a pension fund, make sure you know the risk that you are taking and make sure that you’re not trying to gain [unrealistic] benchmarks to maximize revenues."