The Canadian federal gubmnt has consistently underestimated how much it will have to pay out to retirees in the future, and it has consistently overestimated how much income investments will generate. The result is that it has severely underestimated how much the pension liabilities will add the federal budget deficit in the future.
A recent publication from the C.D. Howe Institute suggests that the present value of these deficits is roughly $120 billion. Their conclusion:
An economically meaningful fair-value estimate
of the unfunded liability of federal government
employees’ pension plans puts it at $272 billion –
some $120 billion higher than reported. The same
approach to determining the annual cost of benefits
accruing in these plans shows it to be between
45 and 60 percent of pensionable pay – more than
twice as high as reported, and a far higher rate of
tax-deferred wealth accumulation than is available
to other Canadians. The federal government should
incorporate these numbers in the official measures
of its net debt and annual budget balance. This
would be a key first step toward reforms that would
alleviate a burden that few taxpayers know they
bear, and that would protect taxpayers from risks
few know they run.
Please note that this study refers only to the federal pension liabilities. I expect many municipal and provincial pension liabilities are in even worse shape. As a result, the net drain to future taxpayers will be even higher when these net liabilities are added to burden.