By Sheryl Smolkin
Four years ago I wrote an article for the Toronto Star about the Saskatchewan Pension Plan called Is this small pension plan Canada’s best kept secret? Subsequently I was asked to help SPP implement a social media plan and started blogging weekly on savewithspp.com.
I learned that the plan is open to anyone between ages 18 and 71 who has registered retirement savings plan contribution room, regardless of where they live in Canada.
Although I receive a defined benefit pension and save in a personal RRSP, TFSA and unregistered investment account, I decided to open an account with SPP and encouraged my husband and other family members to also join the plan.
Here are five of the reasons why I decided to join SPP and continue to make regular contributions:
- Contributions: SPP members with employment income can contribute up to $2,500/year. Because I have incorporated and my company pays me dividends and not salary, I do not have RRSP contribution room. However, I can transfer in $10,000/yr. from my personal RRSP. I take full advantage of this feature.
- Professionally managed money: I read and write about how to invest retirement savings every day. Yet I still don’t always feel confident making major investment decisions. I like that my contributions to SPP are managed by investment professionals. Investments are also reviewed quarterly by five appointed trustees who care about putting returns in my pocket. One-third of SPP trustees are members.
- Investment fees: Fees can make a huge difference in the amount of money I accumulate in the plan. SPP has NO extra fees. There are no fees to join, change, start, increase or decrease contributions. The only fee charged is a management fee that typically averages 1%. This fee pays all professional and operating expenses of the plan.
- Investment returns: SPP returns are solid. There will always be fluctuations in market returns from year to year but I’m in it for the long haul. In 2014 the Balanced Fund earned 9.1% and over SPP’s 29 year history average earnings have been a healthy 8.1%.
|Fund return history|
|** Return since the inception of SPP.|
- Annuity purchase: Members can elect to transfer out SPP savings into a locked-in retirement account (LIRA) after age 55 and convert their LIRA into a registered retirement income fund (RRIF) no later than the end of the year they turn 71. They can also transfer the money directly into a prescribed RRIF. But I will probably opt for an annuity purchased from the plan at age 71 that will pay me a monthly income for life with a survivor pension for my husband. I like the idea that this will generate another stream of predictable income to support me when I’m retired.
Understanding SPP annuities
Have you started saving with SPP yet? Have you made your 2014 contribution? It’s easy but if you need help you can call 1-800-667-7153 a real person in Kindersley, Saskatchewan will always answer your call. You can also find out more about the SPP here and here.