Originally published in the Ottawa Citizen on December 18th, 2010. To go to the Ottawa Citizen website please click here
Thousands of Nortel pensioners will now be allowed to invest their pensions with private fund managers, after the Ontario Liberal government announced Friday it will reverse a decision forcing them into a safer — but less profitable — regime.
“We’re very pleased by the government’s response,” said Don Sproule, national chairman of the Nortel Retirees and Former Employees Protection Canada (NRPC).
Sproule was one of several pension leaders invited to Queen’s Park on Friday and informed of the decision by a senior bureaucrat.
In a letter, Finance Minister Dwight Duncan told the NRPC executive they had “made strong arguments for allowing greater pension choice.”
Duncan said the government will table legislation allowing that choice while “safeguarding benefit security.”
“The ability to opt out of the current wind up approach would allow pensioners who have a greater risk tolerance to elect to pursue investment strategies that may ultimately lead to higher benefits,” Duncan said in a letter addressed to Sproule.
“But it would also ensure that no pensioners have their benefits put at increased risk without making a clear choice.”
Pensioners wishing to opt out of the government-led plan will now have to provide “adequate disclosure” indicating an informed choice.
Sproule said details of the new plan were likely “months out” and will follow an open tender to financial institutions.
Pensioners had complained they faced an immediate 10-per-cent loss if the government-led windup of their $2.5-billion plan went ahead with an annuity purchase as planned.
They argued those annuities, contracts with financial institutions that provide fixed payments, would put them at a huge disadvantage. Annuity markets are at historic lows and lack the capacity to take on the Nortel fund’s massive infusion of capital, they said.
More than 1,000 angry pensioners travelled to Queen’s Park in September to voice their concern over a government-led windup.
Their concern quickly turned to anger when they were informed by a reporter that Duncan had rejected their request.
Duncan said the underfunded Nortel plan, already about $1 billion, or 30 per cent short, could not endure further uncertainty.
“We’ve decided it’s best not to take a riskier road on a pension that’s already obviously been horribly mismanaged,” he said at the time.
Sproule reacted to that news by threatening to haunt the Liberals in next year’s election.
“Quite frankly, the 2011 election begins now,” he said in September. “We have 18,000 Nortel pensioners (10,260 based in Ontario) who are going to come forward and not let them forget.”
Unabated, the pensioners continued their fight. In late September, two members protesting an Ottawa event feting Dalton McGuinty were granted an audience with the premier.
McGuinty pledged to take a second look at the Nortel decision. On Friday, the government announced its surprising conclusion.
Anne Clark-Stewart, 64, one of two pensioners who met with McGuinty that night, credited the Ottawa-born premier for over-ruling Duncan on the issue.