On this blog, we’ve been clear that the root cause of Canada Post’s insolvency revolves around its Defined Benefit Pension Plans—which, to their credit, Canada Post has been trying to abolish for over a decade.
However, the Canadian Union of Postal Workers (CUPW) has refused to budge on the issue and ultimately prevailed, to the point where it’s no longer even part of the public discussion. While on the surface, it may appear that MP Joël Lightbound conceded to Canada Post’s demands, the truth is more practical: if Canada Post workers are entitled to keep their defined benefit pensions, then budget cuts must come from somewhere else.
No Employer Contributions in 2024? That’s a Red Flag.
In our recent deep dive into Canada Post, we came across a startling fact: according to the Canada Post Pension Plan Report to Members 2024, no employer contributions were made to the pension plan in 2024.
Anyone familiar with defined benefit (DB) plans knows these are essentially legalized pyramid schemes. The current workforce funds the retirees, and any investment profits are banked. But here’s the alarming part—according to that same 2024 report, the DB component of the Canada Post pension plan holds about $32.5 billion in net assets available for benefits.
Net Assets ≠ Liquidity
As a financial researcher, I must point out that net assets do not equal liquidity. Net assets represent total assets minus liabilities—but if you are forced to sell those assets under pressure, their value can quickly drop.
Take this example: if I own a commercial building and everyone knows it has structural issues, I’ll only receive lowball offers. The same applies to pension fund assets. If large-scale asset liquidation begins, savvy investors will spot the distress and revalue those assets accordingly.
Defined Benefit vs. Defined Contribution Plans
A Defined Benefit (DB) pension plan guarantees retirees a specific monthly income for life, usually based on years of service and highest average salary. The employer carries the investment risk and must make up for any shortfall. In contrast, a Defined Contribution (DC) plan involves contributions from both employee and employer into an individual account. Retirement income depends entirely on investment performance, placing all risk on the employee. DB plans offer predictable income, while DC plans offer flexibility and portability with uncertain outcomes.
Canada Post’s Ballooning Pension Liability
Canada Post workers currently on strike are defending their Defined Benefit Pension Plans. With $32.5 billion in net assets, this pension fund would be classified in the stock world as a large-cap entity ($10B–$200B).
But here’s the math that concerns us:
- Canada Post has about 42,711 retired members.
- If each receives $70,000/year, the annual payout would be $2.94 billion—nearly $3 billion/year, indexed to inflation.
Even using ultra-conservative estimates, assuming retirees only receive $40,000/year, the fund would still be paying out $1.6 billion annually.
Canada Post Is Financially Insolvent
Not only is Canada Post structurally insolvent, but it’s also reportedly over $1 billion in debt to the federal government. And if no employer contributions were made in 2024—largely due to repeated CUPW strikes—then how much money was depleted from the pension fund?
If we assume a minimum of $1.6 billion in required annual pension payouts, and account for indexation to inflation, then even in a stock market downturn, the plan must increase payouts—not reduce them.
The Problem Will Get Worse
As more workers retire early or receive retirement packages, the financial burden on the fund will only increase. This problem is not going away. The popular solution of ending door-to-door delivery doesn’t solve the core issue.
If you ask us, the smarter move would be to end Canada Post’s Defined Benefit Pension Plan—not essential services.
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