Personal Finance

Ontario Pension Plan

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  • Jun 21st, 2016 10:06 pm
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Deal Addict
Dec 11, 2010
1700 posts
137 upvotes
rb wrote: Is it really up to the government to guarantee anything? How can they guarantee returns, how do they know what life expectancy is going to be. Shouldn't we take responsibility?
They can guarantee returns, as assuming it goes to transit and infrastructure, the government can in effect borrow that money with a guaranteed return (eg. paying it back with interest over X number of years). In the end though, my concern is that they won't come up with a viable plan to pay it back, resulting in the OPP being paid out of general revenues.
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Jan 7, 2011
1458 posts
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KW
If they had an option to defer to 85 at a rate that would actually meet my needs from then on I might actually support this.

As is CPP/OPP is a meaningless pittance and forces me to save/work later in life than necessary in case I actually live to be a 110 and need the money, but in all likely hood it will be a wasted effort.

We all know these stories - people that slaved in jobs they had long tired of and when they did finally retire they were in the ground a month later. People that wanted to help their kids but hung onto every nickle to their last breath, when it finally passed down the kids were in their 70's and the inheritance meaningless. People trapped because they don't know what they will need.

That is the help the private sector really needs - an exit strategy that lets them retire with reasonable savings and secure in the knowledge they won't be a burden. If I don't have to worry past 85 I can look after the rest - in fact I am going to retire a lot earlier.
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Aug 18, 2005
21223 posts
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Burlington-Hamilton
I'm most concerned about how the ORPP is going to harm businesses; Ontario's industry will not be able to pay the best and brightest minds top dollar because they have to hold money back to put it in the ORPP. So Ontario becomes a less competitive and innovative Province through due process of law and government budgeting. Just great.

This ORPP is a massive bondoogle and it makes me angry beyond description.

Just exempt me if I pay $2K into the RRSP and I'll be fine with that.
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Deal Guru
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Nov 30, 2009
12178 posts
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Toronto
I kind of like the idea Saskatchewan opt in plan, but I'm not sure how well that's working. If anything the CPP should have just been enhanced to benefit all Canadians.
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Dec 24, 2002
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insurance1 wrote: They can guarantee returns, as assuming it goes to transit and infrastructure, the government can in effect borrow that money with a guaranteed return (eg. paying it back with interest over X number of years). In the end though, my concern is that they won't come up with a viable plan to pay it back, resulting in the OPP being paid out of general revenues.
In some ways yes and in some ways no - if they borrow for 30 years and promise a 3% return, what if inflation over that time period is 3% - effectively there is no return to the general population, what if over the same period interest rates fall to 1% then the government would be forced to subsidise the pension promises with money from general revenue. What if the population falls significantly ? (Young people leave the province in droves because of lack of jobs) - how do you continue to pay out?
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Jun 9, 2003
25310 posts
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Markham, ON
insurance1 wrote: Defined Contribution are really just savings plans, not an actual pension, in that nothing is guaranteed. So yes, that makes sense that you still don't have a pension and should contribute to the OPP.
yes, but i want to choose what to invest in rather than letting the Ontario Govt decide
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Jan 7, 2011
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KW
insurance1 wrote: Defined Contribution are really just savings plans, not an actual pension, in that nothing is guaranteed.
How is that different from a defined benefit plan that is based on investments that failed to support it's payout levels?

I already have one of those and got the "oh by the way we are reducing what we told you by 30%" letter last year. Third reduction in 10 years.

The difference between a DB and DC plan is DC plans are a what you put in is what you get out, DB plans are a system of winners and losers.
Deal Addict
Oct 14, 2004
1474 posts
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Toronto
The Liberals just want to find a way to spend every single dollar in our paycheque on their 'noble' causes. You did hear today about the new Hydro plan to essentially get everyone to pay an extra $7/mth so that those families earning less than $50k can save $30/mth. They are also phasing out the clean energy subsidy of 10%...so boom, another $120/yr for the average household gone!
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Dec 24, 2002
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James_TheVirus wrote: The Liberals just want to find a way to spend every single dollar in our paycheque on their 'noble' causes. You did hear today about the new Hydro plan to essentially get everyone to pay an extra $7/mth so that those families earning less than $50k can save $30/mth. They are also phasing out the clean energy subsidy of 10%...so boom, another $120/yr for the average household gone!
can proudly say I never voted for them !
Deal Guru
May 9, 2007
14883 posts
4842 upvotes
Nanaimo, BC
insurance1 wrote: I'm not sure, I have a government pension so legally they cannot reduce the payments. I thought it was the same for private sector companies.
We have had previous discussion related to this. Some DBPPs are solely trusteed by an employer. If the employer fails to make its contributions to the plan and subsequently goes bankrupt, their may be no one to hold accountable for the failure to pay. (Generally, at least in BC, DBPPs have actuarial evaluations every three years, so in volatile business sectors this can happen as it did with Nortel.)

In a jointly trusteed (jointly by an employer and union) there is less risk of this as the joint trustees keep a check on things more frequently than every three years. In addition, multiple employer plans have more financial diversity and stability. A jointly-trusteed, multiple employer DBPP provides greater stability and predictability and a single employer plan in which the employer is the sole trustee.
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Oct 26, 2003
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LostInTruth wrote: I kind of like the idea Saskatchewan opt in plan, but I'm not sure how well that's working. If anything the CPP should have just been enhanced to benefit all Canadians.
i wasn't aware sask have op in plan, but there is CPP, OAS, RRSP and TFSA for your retirement, how complicated do we need?
Deal Addict
Mar 10, 2011
2583 posts
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Toronto
insurance1 wrote: I'm not sure, I have a government pension so legally they cannot reduce the payments. I thought it was the same for private sector companies.
Nope not the same for private sector DB plans. Underfunded plans have changed the payout formulas to reduce the payouts, frozen the pension plans and moved employees to DC plans and in some cases have terminated the plans.

The unfunded liabilities in private sector company pension plans can cripple the viability of the company to survive so such actions have been necesaary. They don't have the luxury that public sector pension plans have to continually go to the taxpayers every year for increased contributions.
Deal Addict
Dec 11, 2010
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Biff88 wrote: Nope not the same for private sector DB plans. Underfunded plans have changed the payout formulas to reduce the payouts, frozen the pension plans and moved employees to DC plans and in some cases have terminated the plans.

The unfunded liabilities in private sector company pension plans can cripple the viability of the company to survive so such actions have been necesaary. They don't have the luxury that public sector pension plans have to continually go to the taxpayers every year for increased contributions.
I thought the government regulated private DB pensions to make sure companies make enough payments to ensure they are solvent? Perhaps I'm wrong.
Deal Addict
Mar 10, 2011
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Toronto
insurance1 wrote: I thought the government regulated private DB pensions to make sure companies make enough payments to ensure they are solvent? Perhaps I'm wrong.
No...companies can reduce the payouts if plans becomes unsustainable. I know people who have had their private sector DB plan payouts reduced as the other poster joe_greps described above. When this happens, the pensioner gets credit under the original formula up until the date of the payout formula change.

For example..an employee has worked for a company for 10 years and the pension plan has a 60% payout of final x years salary average..but at that point the plan has a large unfunded liability necessitating changes to become sustainable and the formula changes to 50% payout. If the employee stays employed at the company for a total of 30 years, the pension payout will be calculated as 10 yr @60% + 20 yrs @ 50%

Legally I think that public sector pension plan payouts can be changed or reduced as well...whether the political will is there..is another story.
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Jun 3, 2006
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insurance1 wrote: Defined Contribution are really just savings plans, not an actual pension, in that nothing is guaranteed. So yes, that makes sense that you still don't have a pension and should contribute to the OPP.
While you might be right about the "not guaranteed", it's still a tax on those who are being responsible with money at the end of the day. No one in the right mind would rely solely on one pension plan.

I already have a combination of DCPP, RRSP, CPP and part of a TFSA dedicated towards retirement, in my case my math tells me this will just become a tax now and a pushing me to being taxed more when I start using my retirement egg.
Deal Addict
Dec 25, 2004
2276 posts
226 upvotes
So the government that spends money like drunken sailors and runs massive deficits wants to force its hapless citizens to save money? Perhaps they should look in the mirror first.
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Jan 7, 2011
1458 posts
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KW
peano wrote: So the government that spends money like drunken sailors and runs massive deficits wants to force its hapless citizens to save money? Perhaps they should look in the mirror first.
And we are going to trust them to manage it.

It's like asking Paul Bernardo to babysit.

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