Hi all,
Thanks once again for many excellent comments, I want to respond briefly to a few now, though there are still some older ones that I hope to get to later.
First, I would like to mention that my colleagues Michael Monagan and Nilima Nigam are organizing an info session on possible downsides to the DB proposal at *AQ 4100* for *1:30pm tomorrow* (Thursday).
This is independent of this discussion (I think they, like many people, are not on this list) and organized for the benefit of the Math Department. However, I asked their permission to advertise it more widely.
Note I probably will not be able to make it there myself - I am Surrey based ... one of the reasons I'm discussing this via e-mail vs. rather in person or attending fora. I've never talked with Michael or Nilima about pensions, but I find them to be very insightful
generally.
I can add that I wish that there had been a more open ended discussion earlier in the process. I feel that I'm learning a ton through this thread (though sorry for the mailbox overload), in many ways more than I did through SFUFA's resources including the
recorded fora. Which nevertheless are quite helpful, for anyone joining late, do read: <
http://www.sfufa.ca/current-issues/pensions/resources/>. I will comment
that some of the information there is arguably misleading. The pension cost calculator in particular frames the costs in a way that I don't find reasonable (ignoring inflation, for instance) and I fear may gives some people the impression that they'll be
paying nothing after 3 years. Incidentally, I'd like to thank David Broun and Julian Christians for offering some drop in times to discuss pension issues during the vote, I think this is a good idea.
A couple of other things I would like to reply to quickly:
Chrsitof, thanks for the clarification, and also the discussion about the implications of continuing past 65, which for me has been the clearest explanation so far. I certainly encourage other to read it. Personally I'm ambivalent about how I feel about [dis]incentivizing
working past 65, but I encourage those who feel strongly about it one way or the other to read that e-mail to understand how each plan works for those near retirement (if you are currently confused, as I was).
Martin, thanks for your clarification on your position. I think I understand it now, but I also feel I disagree, at least to an extent.
The point for me here is that I don't think there is symmetry between the DC option (where considerable choice is left to the individual) and the DB option (where no choice is left).
In some sense I might say that there are at least 3 ways you can plan under DC, say "Real Estate" (RE), "Life Income Fund" (LIF) and "Annuity" (Ann). You could also chose a combination of them, or something else (for example, bringing your parents to Canada).
Under DB, there's only one choice, which is like the Annuity. Let's take for granted that's much better, and call it (Ann++). Even if everyone feels that (Ann++) is better than (Ann), probably many think that (RE), (LIF), bringing parents to Canada, etc.
are better than (Ann++). Arguably if people clearly understand there options and vote self-interest, then one can use that to justify a move to (Ann++). But I think there's a good case that a bare majority for (Ann++) won't be altruistic in that the difference
between (Ann) and (Ann++) is probably a mild gain for that group, but may be a very significant loss the others.
Let me propose a hypothetical. Suppose that there were an opportunity to implement mandatory contributions to some kind of pooled retirement fund, which would provide the kind of smoothing of benefits that some would like. Suppose this followed a new law
that made all these contributions tax-advantage (so no 8% or 10% limit). Would you favour joining such a plan? What % of everybody's salary would you suggest we invest in this fund? How would we determine this? I think it is a complicated question. I could
certainly imagine interest in some fairly high numbers from faculty who would do very well in such a scenario. If we have a process where younger faculty are not engaged, it seems that a possible outcome is that we'd end up with a contribution of something
like 25% passed by a referendum where 40% of the (mainly older?) faculty vote. (If the last one is any indication.)
I may be getting carried away here. I'm not generally opposed to collective action, but I feel that 10% is a lot to ask. (25% certainly would be).
In terms of altruism, in a situation, like here, where the costs and benefits are somewhat ambiguous, but one alternative provides much more freedom to adapt than the other, I feel that the option with more freedom is likely to be more altruistic, even if we
have a very limited understanding of other people's preferences (such as will be obtained from a low participation yes-no vote).
Best regards,
Tamon
________________________________________
From: Martin Hahn <
mhahn@sfu.ca>
Sent: November 14, 2018 10:00 AM
To: Tamon Stephen;
academic-discussion@sfu.ca
Subject: Re: Pensions vs. Mortgages
Thanks for another thoughtful contribution, Tamon. As you seem puzzled by the conclusion of my note, let me clarify. My argument was:
- What would be best for most people depends to a large extent on personal preferences.
- We cannot know how these are distributed
- Thus there is no way to know how to vote altruistically.
[I did not mention that everyone's voting for what is best for them will, in fact, give us an _expression_ of the distribution of personal preferences]
So everyone should vote in their self-interest.
In doing that, consider the fact that you do not now know which plan will give you the most cash ( I agree with Oliver that it looks like DB will be better, but I also agree his numbers are too optimistic). Only actual number crunching for your own case
will tell you that.
But if DB is adopted, you will have be able to make the decision to switch or not after the numbers are crunched.
So (especially if you have only a few years of 10% contributions to make), self interest provides no reason not to vote for switching to DB. And if you were hired after 2001, upping that ridiculous health benefits cap is worth a lot (my own family would run
out of benefits in 2-5 years in its present state of health.)
Hope this makes my conclusion a bit less surprising.
M