It’s a sad irony that when it comes to business contracts, our laws and law courts provide the least protection to those who have the most at stake! Bankers have other loans, creditors have other customers, but pensioners usually have their entire financial nest egg in one pension basket. What’s more, creditors are usually owed for a few months’ work, bank loans may extend over several years, but pensioners often have decades, if not a life-time, of deferred earnings to collect – and no other avenues to make up the loss.
Take the case of Sears Canada. Employees contracted with the company to be paid partly in current wages and partly in future pensions. They’ve held up their end of the bargain, working years or decades, receiving partial pay in exchange for retirement security down the road. Suddenly Sears wants to walk away from over $300 million dollars in pension earnings, complaining that they can’t afford to pay. But within the past five years they’ve paid shareholders $600 million in dividends and even now, they are setting aside $9.2 million for executive bonuses. This isn’t right.
Pension advocates have watched similar situations unfold too many times in the past. They know how the story ends, and it’s not pretty. Companies encounter financial trouble. They decide that stopping pension payments will give them breathing room and petition the courts to allow them to do so. The courts invariably agree. If a company restructures, it does so after reducing the amounts it was contractually obligated to pay pensioners.
If restructuring is unsuccessful, bankruptcy ensues and pensioners go to the back of the line waiting for any left-over pennies to pay what they’re owed.
Canada is an international laggard when it comes to our treatment of pensioners. Article 8 of the EU Insolvency Directive requires member states to properly protect workers’ pensions. U.S. jurisdictions protect pensioners’ assets up to $56,000 a year, and pensioners in the UK are guaranteed to receive 90% of their pension through a special pension protection fund. In Canada, only Ontario offers any pension protection, and that only covers a mere $12,000 of an annual pension.
We need to do more. That’s why CARP has launched a petition to put pensioners first. In the event of a bankruptcy or restructuring, we want pensioners to be paid before other creditors. Super-priority was extended to companies' current year pension contributions by the Conservative government in the Wage Earner Protection Program. Super-priority now needs to be further extended to cover the entire pension. It is a critical step in protecting pensioner’s rights. Tell Finance Minister Bill Morneau that pensioners need to come first. Sign the petition at www.carp.ca/pensioners
Whether you are a Sears pensioner or simply a compassionate Canadian, sign because it’s the right thing to do.
For years companies have been eroding pension contracts and obligations. This won’t change unless we put a stop to it. In the past it has been Indalex, Nortel, Wabush Mines and others. It’s Sears today, but it will be another pension plan tomorrow.
Pensioners shouldn’t have their hard-earned assets confiscated, and tax-payers shouldn’t have to support individuals who made every effort to provide for themselves, but have been left cruelly exposed.