By Vivienne Russell | 7 August 2013

Public sector workers in Canada generally outlive their private sector counterparts, bringing significant risks to public sector employers as life expectancy in the country continues to increase, consultants have warned.

A draft report published by the Canadian Institute of Actuaries last week set out revised mortality data for the country. Commenting on the findings yesterday, Towers Watson’s Toronto office highlighted the impact rising life expectancy would have on defined benefit (DB) pension schemes, which are predominant in the public sector, and pay a pre-determined pension for the life of the retiree.

According to the latest CIA mortality tables, a typical Canadian 60-year-old male can now expect to live for a further 27.3 years (up from 24.4 years when mortality was last calculated), while a 60-year-old female can expected to live for another 29.4 years (up from 26.7 years).

This increased life expectancy could immediately increase pension accounting liabilities by 5% to 10% for many plans, Towers Watson said.

The firm added that there was a ‘potential twist’ for public sector plan sponsors in Canada, as public sector workers tended to live even longer.

Gavin Benjamin, a senior retirement consultant at Towers Watson, said: ‘While this may be good news for public sector employees and pensioners who are largely covered by DB plans, there will be financial implications to consider.'

Public sector pensions are 'substantially' higher than private sector ones, the CIA noted.

A retired male public sector worker can expect an average monthly pension of $2,348 compared to $982 for his private sector counterpart. For women, an ex-public sector worker can look forward to an average monthly pension of $1,540 compared to $324 for her private sector equivalent.

Benjamin added that policymakers will need to balance the financial implications of DB pensions against the recruitment and retention benefits they can provide.