Quote:
Originally Posted by opendoor
But it's not really an issue in jurisdictions that actually handle these things responsibly. So sure, in Alberta where for 4-5 decades, the government opted to not actually contribute any money for future payouts, and where teachers were allowed to only contribute 3-4% of their pay, yeah there's an issue. So by penny pinching for almost half a century, the provincial government created a liability that they're responsible for, just like if they took out a bunch of debt to fund something.
But most places have more foresight than that. BC's teacher pension plan (and I believe all public pension plans) currently has a pretty significant funding surplus, even though it's subject to the exact same demographic issues that are apparently "untenable" for DB pension plans. And every 3 years they have to go through actuarial valuations and any underfunding has to be addressed immediately, so if that happens then contribution rates are nominally increased and the problem is averted.
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Well there are a lot of levers and I'm no actuary! But the truth is the higher rates also mean a higher discount rate for these plans, which in turn allows more pension plans to be in surplus territory. There's a reason that DB pans are declining around the world though; they're costly and the sponsor takes on a lot of risk.