Over a year ago, Air Canada made noises about getting into the low-cost holiday-package market, but the proposal was stalled due to a lengthy labour dispute with its pilots. Now, after 19 months of negotiations, sick-ins and wildcat strikes, an arbitrator has ended that stand-off, selecting Air Canada’s final contract offer over that of the Air Canada Pilots Association. Explaining why he sided with the airline, arbitrator Douglas Stanley wrote that “Air Canada needs to establish a low-cost carrier to ensure its competitive future.” (The pilots were opposed to the plan because it could result in non-union members flying planes without consent from the union.) Now that that has been sorted out, how long until we can catch a cheap Air Canada flight to Varadero? [Globe and Mail]
Last fall, the Royal Bank of Canada—with $27 billion in annual revenue, $752 billion in assets and 74,000 employees, the biggest and most prudent bank in the world’s safest banking system—announced that new employees would no longer be eligible to receive what is probably the company’s most important workplace benefit: the comprehensive retirement insurance plan. It insures the Royal’s Canadian employees, or at least those hired before January 1, 2012, against all sorts of risks. The risk of reaching retirement age at a time when stock markets are down, or interest rates are low. The risk of outliving one’s retirement savings. Inflation risk. Risks you’ve probably never even heard of, like reinvestment risk and liquidity risk. Even the risk of earning below market returns.
This generous program wasn’t unique to the Royal. Many employers, particularly big companies, once offered similar plans. Some still do, though their numbers are dwindling. You may be wondering, “Why have I never heard of retirement insurance?” You have. It’s called a pension.
We’re heading for a pension crisis. The federal government says so. The opposition says so. Most provinces say so. The library shelves of the land groan beneath the weight of studies. The first class of baby boomers hit 65 this year, and we’re still not ready. The economist Michael Wolfson, formerly the assistant chief statistician of Canada and now at the University of Ottawa, estimates that half of all Canadians born between 1945 and 1970 who have average career earnings between $35,000 and $80,000 are facing a drop of at least 25 per cent in their post-retirement standard of living. Which is perhaps not surprising given that most of us don’t have a pension plan.
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Canadian public pension funds are suddenly cool—The Economist reports that four of the 40 largest public pension funds are Canadian, and they share an “intriguing” investment approach. Funds like the CPP Investment Board and Ontario Teachers’ Pension Plan sidestep hefty fees from external fund managers, running their portfolios internally at a tenth of the cost. They also emphasize buy-outs, infrastructure and property over publicly traded stocks and bonds. Those tactics have even jaded New Yorkers taking note—New York City mayor (and really, really rich guy) Michael Bloomberg is an admirer of the Canadian funds, while Wall Street firms “consider them rivals.” Read the entire story [The Economist] »