The market crisis and lost pension investment revenues is forcing more faculty members to delay retirement, says University of Western Ontario Faculty Association (UWOFA) President Mike Carroll.
Academic, as well as administrative, pension plans are defined-contribution programs where employees and the university contribute (contributions depend on the employee agreements) and the money is invested according to the employee’s choice.
“When you retire, your money is your money and the university has no further financial obligations to you, so that relieves this university of a financial obligation that many other universities, like Toronto or McMaster, currently have,” he says.
However, the financial downturn which has hurt revenues for the university’s endowed and non-endowed funds has also resulted in lost revenue for invested funds in retirement pensions.
“Depending on how the members allocated their funds, the decline is probably in the area of 25-35 per cent,” he says.
The decline in the value of faculty pensions is causing some to delay retirement and it discourages those from taking the modified phased retirement incentive option. The retirement incentive allows eligible faculty members to reduce their workload over one or two years before full retirement, a one-time option introduced to address the university’s operational budget shortfalls and to reduce layoff numbers.
“Our view is the incentive being offered to faculty is not a particularly generous incentive and not one that will generate many takers,” he says.
“When you put everything together, the absence of an effective retirement incentive, the tremendous slide in the value of retirement pensions given the nature of our defined contribution plan, these things put together are working to ensure our faculty nearing retirement age are going to stay on a little longer than they might otherwise have,” he adds.
Carroll says UWOFA has proposed the university borrow funds to assemble enticing retirement incentive packages. This would be “money well spent,” says Carroll, because the university would be able to recover these funds within a year or so by not having to pay faculty salaries.
Jacqueline Hassall, vice-president of the Professional and Managerial Association at Western, says it is difficult to say what the revenue loss on pension investments was for its members; however she estimates an average drop of 35 per cent.
Although he does not know specific numbers, University of Western Ontario Staff Association (UWOSA) president David Empey says the lost pension revenues for UWOSA members are similar to faculty.
“Most people, unless they are very close to retirement, have kept their money in equities,” he says. “I think in the neighbourhood of one-third are the numbers I am hearing from people.”
Empey says the voluntary retirement incentive for administrative staff, including eligible UWOSA members, does not make up for investment losses from the ongoing market downturn.
Although UWOSA is pleased with the university’s strategies to prevent layoffs and assist those approaching retirement to speed up the process, Empey says the market crisis might prevent members from taking advantage of this option.
“I am hearing from people that, frankly, for financial reasons they need to remain working longer than they thought,” he says.
