Nortel Pensioners rally at Queen's Park to demand: "Don't Wind Up Our Pension
Plans!"

TORONTO, Sept. 15 /CNW/ - Angry Nortel pensioners, together with representatives of labour and pensioner groups from across Canada, are rallying today at noon today at Queen's Park to protest against the Ontario government's plan to wind up their pension fund and convert it into individual annuities with various financial institutions. 

Over 20,000 Nortel retirees reluctantly find themselves at the leading edge of the national pension crisis. They foresee that Wind-up-by-Annuity will make another big dent in their dwindling incomes.

"All Canadians have a right to dignity in retirement," said CAW National President Ken Lewenza. "This is the largest single example of our national pension crisis, which requires a national solution.  We need to double the size of the CPP over the next seven years, boost the Guaranteed Income Supplement by 15% and provide proper protection for all Private Pension Plans. In the interim, the Ontario Government must step in to provide the time for Nortel specific solutions to be found."

The disaster that has befallen Nortel's pensioners is a critical lesson in how a private-sector pension plan can shrink in an era of economic turbulence, inadequate federal laws and obsolete provincial regulations. After Nortel became insolvent in 2009, its retirees found out that Ontario regulators had allowed their pension plan to be seriously under-funded. Recent estimates indicate that many pensioners could permanently forfeit at least 35% of their monthly cheques, a loss that might get much worse if the government doesn't quickly change its rules on winding up the plans.

Don Sproule, National Chair of NRPC said: "It's time the Ontario government realized that its 30 year old laws just don't work! The original intent was to protect pensioners but in today's environment they are being penalized. Our pension plan is under-funded, we are being forced to sell plan assets at a loss and to buy annuities out of our own pockets when costs are at their highest. This puts Nortel pensioners in a lose, lose, lose situation"

Nortel retirees across Canada will be affected by the Ontario government's actions, even if they never worked in the Province. Mike Brault, Chair of NRPC Quebec, commented: "The government is making decisions that affect pensioners in every other province, people who never worked a day in Ontario! We will take the same pain and have no redress."

Even in its weakened state, the $2.5 Billion Nortel pension fund will likely overwhelm Canada's small annuity marketplace. Experienced actuaries and academics have advised that liquidating a large fund, such as Nortel's, could cause a systemic failure of the market, which typically can only supply between $200 Million and $500 Million worth of annuity contracts per year. At best, winding up the plan will cause a steep rise in annuity prices for everyone, resulting in lower pension payments. For many pensioners who had hoped for a dignified retirement, the prospect of depending on the social program safety net is becoming very real.

The 2008 Ontario Expert Commission on Pensions anticipated the Wind-up-by-Annuity problem. In his report, Commissioner Harry Arthurs recommended that the government investigate ways to avoid forced annuitization of big pension plans. He specifically proposed setting up an Ontario Pension Agency to keep stranded or "orphaned" plans alive, but to date the government has shown no interest in taking on the extra responsibility, even though the overall cost to the public might be lowered by reducing social spending to support reduced income retirees.

One solution proposed by the NRPC and their advisors is called the Financial Sponsorship Model (FSM). In FSM the pension fund is transferred to a Canadian bank or a reputable major investment company. Higher pensions would be payable, because annuitization costs are avoided and because of potential investment gains over the longer term. FSM would still include guarantees from the Pension Benefit Guarantee Fund (PBGF) for Ontario service, but at lower cost to the province. The financial sponsor would also be able to guarantee a baseline pension no worse than Wind-up-by-Annuity, thereby removing risk to the pensioners and the province. The initial response to FSM from the financial sector has been positive and several institutions are now preparing formal proposals.

For Nortel pensioners, FSM provides more of their pensions without the unnecessary hardships caused by Wind-up-by-Annuity. For the Ontario government it offers savings on the PBGF and on social programs. For Canada's financial institutions, it provides new opportunities to attract and manage capital. The concept of FSM will also be attractive to corporations that offer defined benefit pension plans because it removes unpredictable impacts on their cash flow caused by the need to fund Wind-up-by-Annuity obligations.

Sproule added: "After September 30, our pension plans will be on a course towards Wind-up-by-Annuity. For a year we have been in discussions with the Ministry of Finance on alternative options, but the silence is deafening! But if we move quickly we can still chart a different and better course for Nortel's retirees and for those who may follow in our footsteps. It's a win-win solution and Ontario would lead the way!"

Rally speakers will Include:

Peter Kennedy (National Secretary/Treasurer, CAW)
Jack Walsh (Vice-President, Canadian Federation of Pensioners)
Andrea Horwath (Leader, National Democratic Party of Ontario)
Brian Rutherford (President, General Motors Retirees)
Hassan Yussuff (Vice-President, Canadian Labour Congress) 
Don Sproule (President, NRPC)  

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