How do you follow a living wage? With a living pension

How do you follow a living wage? With a living pension

Buckerfield’s proceeds with living pension for centenary

Kelvin McCulloch

CEO, Buckerfield’s

Next year, 2019, will mark the 100th anniversary of Buckerfield’s in British Columbia.

Under the leadership of Ernest Buckerfield, this B.C. business grew from nothing to become the dominant agricultural and pet food supplier throughout most of southern B.C., and ultimately become a force in the purchase and export of B.C.’s agricultural products as well.

Ernest Buckerfield established moral authority and trustworthiness throughout all of his company’s dealings by embedding his own high standards and principles into it. To this day, hundreds of British Columbians give testimony to their long and rewarding employment in Buckerfield’s. And as the ‘general store’ in many small communities, thousands of British Columbians grew up going to the local Buckerfield’s store for their weekly supplies.

The current shareholders of Buckerfield’s have done everything they can to bring Buckerfield’s into the modern world. We are still miles behind in internet operations and social media. First things first, we had to rebuild the brick and mortar operations and re-engineer the business processes and products to serve the needs of British Columbians better.

Living Wages: Year 2

As a major part of this process, it took 13 years to build the financial base of this company so that we could offer a rational and fair system of compensation for every employee. Today we’re heading into the second year of ‘living wages’ and everyone’s pay has been lifted by at least the BC Consumer Price Index as of July 2018. No one lost any purchasing power compared to last year. We also lifted the ‘living wage rates’ well beyond the Consumer Price Index in six store locations because the published information about living wages did not look to be reliable. We are still working on ferreting out inequities and making adjustments so that everyone is on the right financial path as much as possible.

READ: Buckerfield’s Living Wage Program – What happened?

The next step: ‘Living pensions’

For the coming anniversary year, we turned our attention to the elephant in the room, pensions. For many years Buckerfield’s maintained an employee pension program for all full-time employees, with a standard employer pension contribution every payday. This year, we started looking at the idea of a ‘living pension’ for full-time employees.

Let’s say that Buckerfield’s wants to continue to grow and prosper for another 100 years. Many of our employees have strenuous jobs that take a toll on their backs, their muscles, their bones. How will we face them when the time comes for them to take a rest from the workplace? Will they have the necessary ‘living pension’ to carry on sustainably?

The answer is a ‘living pension program’ for full-time employees. But where does the money come from?

The first part of the program is of course the Canada Pension Program. Currently, 9.9 per cent of an employee’s gross earning go towards CPP, half of which, or 4.95 per cent, is the employer’s responsibility. The other half is the employee’s, paid through payroll deductions. Over the next five years, these amounts will increase to 5.95 per cent or 11.90 per cent overall. Currently, the average pension payout under the CPP program is $7,552 per year or $630 per month.

Next, there is the Old Age Security Program. Currently, the payout amounts to $596.67 per month for the higher paid member of a two-income household.

Combined, these amounts total $1,227 per month or $14,724 per year.

No one can live on $14,725 per year. Two people living together with a combined monthly income of twice that amount will have great difficulty with the cost of living. If a ‘living pension’ is three quarters of the ‘living wage,’ then the income from CPP and OAS would amount to about half of what people need for a secure, sustainable retirement. If a person will be living alone, their retirement income must be even higher.

Where will the difference come from?

It must come from employees and employers. The only reliable and sustainable way to establish a ‘living pension’ is for employees and employers to start making additional small contributions to a sound pension program as soon as employees enter full-time employment. If a 25-year-old employee starts saving for retirement as soon as they start work and saves a small amount of their income every pay period for their entire working life, they can make up the difference and have a ‘living pension’ to follow their ‘living wage’.

What will a living pension look like?

The plan should be fully transparent. Employees should be able to make investment decisions within the plan if they choose to administer their own accounts. They should have financial planning services available to them and should be able to make additional contributions to their pension plan when they can.

Once the employer has established a ‘living wage’ program, they should offer a pension contribution to the employees’ pension program as an alternative to increasing the employees’ take-home pay. Matching contributions whereby the employer matches the contributions of the employee are the best. One per cent matching contributions produces a two per cent overall pension contribution and even a modest contribution like that can produce a very large amount of pension benefits 40 years later.

In 2019, Buckerfield’s will contribute six per cent of gross earnings for all full-time employees to a new, progressive, all-Canadian pension program. Buckerfield’s has made contributions like this all along but the old program wasn’t progressive or productive enough. The new internet-based program will allow employees to view and control their own accounts at any time, make investment decisions based on their own personal level of risk aversion, obtain financial planning services, make additional contributions and assess how they’re doing in relation to their own ‘living pension’ objectives.

To secure Buckerfield’s through its next 100 years, we believe the combination of ‘living wages’ and ‘living pensions’ over a lifetime is the only way to discharge our moral obligation to the people who make this company possible. We can’t guarantee these things and we can hardly afford them, but the employees of this company are the foundation for the future. With a solid foundation, we can build another 100 years of success, just the way Ernest Buckerfield did starting in 1919.

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