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A Canada Post mail box is located on the corner of Wellington St. Wet and Spadina Ave.. (Fred Lum/The Globe and Mail)Fred Lum/The Globe and Mail

Recent contract settlements at Canada Post and General Motors of Canada expose a widening gap between the pension haves and have-nots in Canada.

The post office, a federal Crown Corporation, tried and failed to close the company's traditional defined benefit pension plan to new hires.

Meanwhile, GM won a historic concession this week to freeze the auto maker's defined benefit plan to all new unionized employees – continuing a steady erosion of private-sector pensions. Members of Unifor, the company's union, are slated to vote Sunday on a new contract that will set the pattern for looming bargaining at Ford and Chrysler in Canada.

This isn't a particularly new phenomenon. For decades, companies in Canada and elsewhere have been getting out of the risky business of offering subsidized, guaranteed and often inflation-protected pensions to their retirees. More typically, they offer nothing at all, or so-called defined contribution plans, where the investment risk falls entirely on retirees.

What is new is the increasingly stark gap between the generosity of pensions in the private and public sectors in Canada.

Pensions in the private sector are steadily eroding. But there has been relatively little change in the public sector.

Roughly 80 per cent of bureaucrats, teachers, police officers and other public-sector workers still enjoy defined benefit pensions, which typically offer a steady and predictable monthly retirement income.

Contrast that to the private sector, where just one in 10 workers still has a defined benefit pension. And every year, these plans cover fewer workers as companies such as GM phase them out.

In 2015, 4.4 million Canadians were covered by defined benefit plans – about 3 million of those in the public sector. A majority of private-sector workers have no pension at all.

The differences create a widening fairness gap – as Finance Minister Bill Morneau pointed out in a 2013 speech, when he headed Morneau Shepell, a pension and benefit consultant. Defined benefit plans are on a path to extinction in the private sector, he said, setting up a confrontation between the "lucky" haves versus everyone else.

"Who believes that the average Canadian, without a defined benefit plan … will, over the long term, agree to continue to fund public-sector employees' pensions at a level that they can only dream about attaining themselves?" Mr. Morneau asked rhetorically.

The gap is likely to get worse. A 2015 report by pension consultant Aon Hewitt found "stark" differences in the way the public and private sectors are reacting to the common challenges of low interest rates, rising investment risks and retirees living longer. The public sector remains committed to defined benefit pensions, while the trend away from them everywhere else is continuing at a "rapid pace," the report said.

Like Canada Post, most federal Crown corporations still offer defined benefit pensions to the bulk of their employees. That includes Via Rail, the CBC, Canada Mortgage and Housing Corp. and the Bank of Canada, according to a 2015 review of Crown-corporation pension plans released recently under the Access to Information Act. A clutch, however, have shifted newer employees to defined contribution plans, including Export Development Canada and the Canadian Tourism Commission.

The review identified low interest rates and longevity as "key sources of concern."

Traditional defined benefit plans also remain the norm for the vast majority of provincial employees. The exceptions are Saskatchewan, which adopted defined contribution plans for many of its workers in the 1970s, and New Brunswick, which introduced a shared-risk model three years ago.

There are two ways to look at the fairness gap.

Some would argue that at a time when pensions are under assault everywhere, governments should be a model of good behaviour.

Ottawa is also working with the provinces to expand the Canada Pension Plan, funded by higher employer and employee contributions.

But that doesn't mean taxpayers shouldn't be concerned about the sustainability of public-sector pension plans. Government pension managers, like their private-sector counterparts, are facing similar challenges, including low interest rates and retirees living longer.

Mr. Morneau is right. The generosity of Canadians only goes so far. Most won't tolerate subsidizing the pensions of the fortunate few – pensions they'll never have themselves.

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