Saint John's pension shortfall worse than predicted

Saint John may be facing a bigger shortfall in its employee pension fund than previously thought, CBC News has learned.

New Brunswick's superintendant of pensions has sent the $123-million valuation back to the city with an order that it be resubmitted. This is the latest development in a series of negotiations between the provincial government and New Brunswick's largest city over its pension shortfall.

Pat Woods, the city manager, said the deficit could be $5 million to $7 million more than the $123 million shown in the most recent valuation of the pension fund.

CBC News has also learned the provincial governmentis questioning, and may disallow, key assumptions Saint John has been using in its deficit calculations.

The assumptions include how much money the fund is likely to earn in the future and how long city employees are likely to live once they retire.

Coun.Stephen Chase, the city's deputy mayor, said the size of the deficit could change based on which assumptions are made in the calculations.

"One assumption is expected return on investment," he said.

"Because of world markets and the way returns are trending that number has to be more conservative. So that's a key change right there."

The city was assuming the fund would earn a rate of return of 6.5 per cent on its investments. But the provincial government said it believes six per cent is more realistic.

The difference adds $32 million to the pension deficit, which already amounts to $123 million.

Dealing with the deficit

Chase said the city will now have to pay even more money annually on top of the approximately $8 million extra city council is already expecting.

Saint John is in negotiations with the provincial governmentover how to deal with the deficit in the employee pension fund.