Despite its exemption from income trust tax, federal pension plan books 22.7% loss

Today we learn that the Public Sector Pension Plan booked a 22.7% loss on its assets......notwithstanding the tax exemption it received from Flaherty on the 31.5% income trust tax.

Could someone in Ottawa, perhaps Flaherty or Harper, or maybe Jack Layton explain to me why the Public Sector Pension Plan is able to own Thunder Energy Trust (which it acquired on the cheap in January 2007) and not have to pay the 31.5% income trust tax, whereas I have to pay a 31.5% tax if I hold this very same investment in my RRSP, as many did?

What could such a wholesale exemption from the 31.5% tax by the pension plans expect to achieve in terms of Flaherty’s “cure all” income trust tax?

Does the existence of such a blatant and massive loophole strike anyone as a Tax “Fairness” Plan or consistent with why a Liberal government created the RRSP in the first place, and as a means for the average Canadians to replicate the tax benefits of pensiosn plans, given that 75% of Canadian do not belong to a pension plan, and were at an otherwise distinct disadvantage?

Meanwhile, why are the Liberals not defending the sanctity of RRSPs relative to pension plans and not a single word has ever crossed their lips about this massive loophole for the pension plans? Ditto for Canada’s gawd awful press, as income trust after income trust gets picked off by the pension plans, who are exempt form this tax. It’s called Tax Arbitrage folks and you are on the receiving end of this abuse! Do the Liberal’s stand in fear of the Jim Leech’s of this world, while the rest of us get (financially) slaughtered and (fiscally) abused?

Does it seem fair that the very bureaucrats like Mark Carney who concocted the income trust tax and all its Byzantine rules, should benefit from a tax carve out for their very own pension fund? The term for this is self dealing. Meanwhile the Public Sector Pension Plan lose 22.7% of its value due to the financial meltdown. Perhaps they have a sense what it meant to income trust investors to have lost 18% of their investment value, due to Flaherty’s whimsical income trust tax that was ushered in with ZERO proof, and then suffer the combined losses from the financial meltdown as well, for combined losses of some 40% in their life savings? The 18% loss form the income trust tax is a PERMANENT loss unless it is reversed. Whereas market losses are subject to potential recapture over time, in the way in which a permanent tax effect is not.

Just imagine the fireworks if the Public Sector Pension Plan which manages the retirement assets of Canada’s 380,000 federal civil servants had lost 22.7% of their investments as a SOLE cause of a government action, as income trust investors did? Do you suppose they would settle for 18 pages of blacked out documents as “proof” of that theft? Would the politicians be as lame as they have been on the income trust tax rip-off? Would the press be emboldened to lift a finger on their behalf, after all we are talking about the retirement assets of the Royal Canadian Mounted Police, the Canadian Forces, and the Reserve Force. People who matter in our near-police state society, and who stand idly by, while other law abiding Canadians are getting their life savings stolen from them on a complete fraudulent falsehood, known as Harper’s tax leakage.


Federal pension plan books 22.7% loss

Top executives of Public Sector Pension Investment Board received partial bonuses for performance in past fiscal year

Janet McFarland

Globe and Mail Update Last updated on Thursday, Jul. 23, 2009 04:58PM EDT

The pension plan for federal government workers lost 22.7 per cent in the latest fiscal year, but paid partial bonuses to its top executives for meeting their individual objectives for the year.

The Public Sector Pension Investment Board reported Thursday it was buffeted by the financial crisis that began last year, seeing its assets fall by $5.1-billion to $33.8-billion as of March 31, 2009, down from $38.9-billion a year earlier.

The pension manager said its equity portfolio lost more than 30 per cent of its value last year, while its real estate holdings were down almost 17 per cent. PSP Investments said its bond holdings offset the losses, however, with government bonds earning a 19.4-per-cent return for the year.

“We experienced exceptionally difficult financial and economic times in Canada and around the world over the last year,” chief executive officer Gordon Fyfe said in a statement.

PSP Investments is a Crown corporation that invests pension money for the public service as well as the Royal Canadian Mounted Police, the Canadian Forces, and the Reserve Force.

The fund's annual report, released Thursday, said Mr. Fyfe's compensation totalled $1.42-million in fiscal 2009, up 11 per cent from $1.28-million last year.

His pay included a $485,000 base salary, an annual bonus of $189,122, a deferred incentive plan payment of $611,100, benefits and other compensation worth $35,876, and accrued pension benefits worth $98,500.

Fund chairman Paul Cantor said that due to underperformance in 2009, executives did not receive short-term or long-term bonuses allocated for fund performance. But he said the board of directors decided to pay the portion of short-term bonuses based on achieving individual objectives.

Mr. Cantor added PSP Investments introduced a new long-term incentive plan in fiscal 2009, which is based on four-year investment performance. It is similar in structure to the four-year design at many other large pension managers.

“The deferred incentive payments in 2009 reflect the strong fund performance achieved over the four-year period from 2004 until 2007,” Mr. Cantor said in a statement in the fund's annual report.

The new incentive program means the poor performance in 2009 will continue to affect bonus levels until 2012. As well, PSP Investments said base salaries for managers were not increased for fiscal 2010.