Finance
May 25, 2007

Amendments Allow Government to Pay
$982 Million into Public Service Pension Plan

Amendments to the Public Service Pension Act that passed through the House of Assembly yesterday allow the Provincial Government to pay $982 million into the Public Service Pension Plan, said the Honourable Tom Marshall, Minister of Finance and President of Treasury Board.

On March 15, 2007, the Provincial Government announced it would place $400 million into the Public Service Pension Plan immediately and another $582 million by June 30, 2007, to address longstanding concerns around the unfunded pension liability and to bring stability to this plan for public sector employees.

"In order to facilitate these payments, this government and the public service unions agreed to delete all references to further special payments of $60 million annually from its respective collective agreements. The amendment debated yesterday will ensure this decision is reflected in the Public Service Pension Act," said Minister Marshall.

"When we took office in 2003, we inherited a province that was bordering on financial ruin. In the face of a near billion dollar deficit, addressing the unfunded liabilities of the public sector pension plans seemed far-fetched. However, strong fiscal management practices by the Williams Government and the support of the public sector unions have allowed this government to bring stability to the plan in less than four years," explained Minister Marshall.

Minister Marshall said strengthening the Public Service Pension Plan will mean a considerable savings for the province. "This decision makes absolute fiscal sense," said Minister Marshall. "The $60 million special payment was not covering interest on the unfunded liability. Given the province�s current borrowing rate of approximately 4.5 per cent, any funds borrowed to reduce the unfunded liability, which grows with interest at 7.5 per cent annually, will save the province approximately $27 million annually."

Unfunded pension plans liabilities, as of March 31, 2007, totaled $1.9 billion; they are included in the $11.6 billion debt of the province. Minister Marshall said government has been acting on the advice of credit rating agencies that have indicated the province must maintain a sound budget strategy, including dealing with its deficit, debt and unfunded pension liabilities, if the province wants to maintain current credit ratings.

"Using the $2 billion Atlantic Accord advance negotiated by Premier Danny Williams to address the unfunded liabilities of the Teacher�s Pension Plan and investing $982 million to strengthen the Public Service Pension Plan will save the province approximately $175 million annually, a clear illustration of this government�s commitment to fiscal responsibility and debt management."

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Media contact:
Bill Hickey
Director of Communications
Department of Finance
709-729-6830, 691-6390
billyhickey@gov.nl.ca 

2007 05 25                                                   11:50 a.m.

 


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