Tag Archives: Katherine Strutt

How SPP changed my life

Punta Cana: March 2018

After a long career as a pension lawyer with a consulting firm, I retired for the first time 13 years ago and became Editor of Employee Benefits News Canada. I resigned from that position four years later and embarked on an encore career as a freelance personal finance writer.

In December 2010 I wrote the article Is this small pension plan Canada’s best kept secret?  about the Saskatchewan Pension Plan for Adam Mayers, formerly the personal finance editor for the Toronto Star. The Star was starting a personal finance blogging site called moneyville and he was looking for someone to write about pensions and employee benefits. I was recommended by Ellen Roseman, the Star’s consumer columnist.

The article about SPP was my first big break. I was offered the position at moneyville and for 21/2 years I wrote three Eye on Benefits blogs each week. It was frightening, exhausting and exhilarating. And when moneyville began a new life as the personal finance section of the Toronto Star, my weekly column At Work was featured for another 18 months.

But that was only the beginning.

Soon after the “best kept secret” article appeared on moneyville, SPP’s General Manager Katherine Strutt asked me to help develop a social media strategy for the pension plan. Truth be told, I was an early social media user but there were and still are huge gaps in my knowledge. So I partnered with expert Leslie Hughes from PunchMedia, We did a remote, online presentation and were subsequently invited to Kindersley, Saskatchewan, the home of SPP to present in person. All of our recommendations were accepted.

By December 2011, I was blogging twice a week for SPP about everything and anything to do with spending money, saving money, retirement, insurance, financial literacy and personal finance. Since then I have authored over 500 articles for savewithspp.com. Along the way I also wrote hundreds of other articles for Employee Benefit News (U.S.), Sun Life, Tangerine Bank and other terrific clients. As a result, I have doubled my retirement savings.

All my clients have been wonderful but SPP is definitely at the top of the list. I am absolutely passionate about SPP and both my husband and I are members. Because I was receiving dividends and not salary from my company I could not make regular contributions. Instead, over the last seven years I have transferred $10,000 each year from another RRSP into SPP and I would contribute more if I could.

By the end of 2017 I started turning down work, but I was still reluctant to sever my relationship with SPP. However, as my days became increasingly full with travel, caring for my aged mother, visiting my daughter’s family in Ottawa, choir and taking classes at Ryerson’s Life Institute, I realized that I’m ready to let go at long last. After the end of May when people ask me what I do, I will finally be totally comfortable saying “I am retired.”

I will miss working with the gang at SPP. I will also miss the wonderful feedback from our readers. I very much look forward to seeing how both savewithspp.com and the plan evolve. My parting advice to all of you is maximize your SPP savings every year. SPP has changed my life. It can also change yours.

Au revoir. Until we meet again….

—-

Written by Sheryl Smolkin
Sheryl Smolkin LLB., LLM is a retired pension lawyer and President of Sheryl Smolkin & Associates Ltd. For over a decade, she has enjoyed a successful encore career as a freelance writer specializing in retirement, employee benefits and workplace issues. Sheryl and her husband Joel are empty-nesters, residing in Toronto with their cockapoo Rufus.

SPP contribution levels rise, says General Manager Katherine Strutt*

 

Click here to listen
Click here to listen

Today, I’m very pleased to be talking to Katherine Strutt, general manager of the Saskatchewan Pension Plan. She has some exciting news to share with us about enhancements to the program, including an increase to the SPP maximum annual contribution level effective immediately for the 2017 tax year.

SPP is the only plan of its kind in Canada — a retirement savings plan, which does not require an employee/employer relationship. As a result, it can be of particular benefit to individuals with little or no access to a pension plan.

Welcome, Katherine.

Thank you, Sheryl.

Q: For the last seven years the maximum annual contribution SPP members with RRSP contribution room could make was $2,500. How has that changed?
A: As you indicated, the maximum annual contribution limit was increased to $6,000 effective January 29, 2018, and it can be used for the 2017 tax year. However, members must still have available RRSP room in order to contribute the full $6,000 but the limit is now indexed as well, starting in 2019.

Q: If a member contributes $6,000 until age 65 how much will his or her pension be?
A: We estimated that someone contributing for 25 years and retiring at age 65 can end up with a pension of about $2,446 a monthbased on an 8% return over the period. However, we encourage people to use the wealth calculator on our website because they can insert their own assumptions. And if they want a more detailed estimate they can call our office.

Q: Can a spouse contribute for his or her partner if that person doesn’t have earned income and how much can the contribution be?
A: The SPP is a unique pension plan in that spousal contributions are acceptable. So, for instance, my spouse has to be a member. But I can contribute to his account and my account up to $6,000 each if I have the available RRSP room. If I’m making a spousal contribution, the money goes into his account, but I get the tax receipt. Other pension plans don’t offer that option. You could have a spousal RRSP, but with SPP you can actually have a spousal pension plan.

Q: Oh, that’s really fantastic. So actually, in effect, in a one-income family, the wage earner would get $12,000 contribution room for the year.
A: Yes, as long as they have available RRSP room, that’s for sure.

Q: That’s a really neat feature. And to confirm, members can contribute the full $6,000 for the 2017 tax year?
A: Yes, they can. Because we’re in the stub period right now, any contribution made between now and March 1st can qualify for the 2017 tax year.

Q: Have you had any feedback on the increased contribution level? If members are just finding out about the increase now, how much of an uptake do you expect given that, you know, maybe they haven’t saved the money or they haven’t allowed for it?

A: We’ve already had some members that have done it. I can’t tell you how many, but I was checking some deposits yesterday, and I saw that some people have already topped up their contributions. We anticipate that people who contribute on a monthly basis will start increasing their monthly contributions because they have an opportunity to do so. But it will be really hard to know until after March 1st how many people actually topped up their 2017 contributions.

The response has been very, very positive from members. They have wanted this for a long time. The new indexing feature is also very attractive as the $6,000 contribution will increase along with changes to the YMPE (yearly maximum pensionable earnings) every year.

Q: How much can a member transfer into the plan from another RRSP? Has that amount changed?
A: No, that amount has not changed. That remains at $10,000. But the board is continuing to lobby to get that limit raised.

Q: Another change announced at the same time is that work is beginning immediately on a variable pension option at retirement. Can you explain to me what that means and why it will be attractive to many members?
A: We have a lot of members who want to stay with us when they retire, but they’re not particularly interested in an annuity because annuity rates are low, and they do not want to lock their money in. They prefer a variable benefit type of option, but until now their only way of getting one has been to transfer their balance out of the SPP to another financial institution.

The new variable benefit payable directly out of our fund will be similar to  prescribed registered retirement income funds, to which people currently can transfer their account balances.

It will provide members with flexibility and control over when and how much retirement income to withdraw, and investment earnings will continue to grow on a tax-sheltered basis. Those members who want to stay and get the benefit of the low MER and the good, solid returns I think will be attracted to this new option.

Some members may wish to annuitize a portion of their account and retain the balance as a variable benefit. This will ensure they have some fixed income, but also the flexibility to withdraw additional amounts for a major expense like a trip, for instance.

Q: Now, what’s the difference between contributing to an RRSP and SPP?
A: In some respects, they’re very similar in that contributions to the SPP are part of your total RRSP contribution limit. One of the biggest advantages I think that SPP has is it is a pure pension plan. It’s not a temporary savings account. It’s meant to provide you income in your retirement.

All of the funds of the members, are pooled for investment purposes, and you get access to top money managers no matter what your account balance is or how much you contribute. Typically those services are only available to higher net worth individuals, but members of SPP get that opportunity regardless of their income level.

And the low MER (management expense ratio) that in 2017 was 83 basis points, or 0.83 is a significant feature of SPP. Solid returns, and the pure pension plan, I think those are things that make us different from an RRSP. We are like a company pension plan, if you are lucky enough to have access to a company pension plan. That’s what we provide to people regardless of whether or not their employer is involved.

Q: If a member still has RRSP contribution room after maxing out SPP contributions, can he or she make additional RRSP contributions in the same year?
A: You bet. Your limit is what CRA gives you, and how you invest that is up to you. So for instance, people that are part of a pension plan might have some additional available RRSP room left over. They can also then contribute to the SPP and get a benefit from their own personal account, in addition to what they are getting from their workplace pension.

Q: MySPP also went live in late January. Can you tell me some of the features of MySPP, and what member reaction has been to gaining online access to SPP data?
A: The reaction from members has been very positive. They’ve been asking for this for a while, and we did a bit of a soft roll out the end of January with a great response. Then members are going to be getting information with their statements, and we expect an even bigger uptake.

Once they’ve set up an account, they can go in and see the personal information we have on file for them, who they’ve named as their beneficiary, when the last time was that they made a contribution and what their account balance is. Furthermore, if they’ve misplaced a tax receipt or can’t find their statement, they can see those things online.

Retired members can get T4A information and see when their pension payments went into their accounts. So it’s a first step, and we think it’s a really positive one, and we’re getting some really good feedback from our members.

Q: Finally, to summarize in your own words, why do you think the annual increase in the SPP contribution level, introduction of a variable benefit and MySPP makes Saskatchewan Pension Plan a better pension plan than ever for Canadians aged 18 to 71?
A: Well, I think that by having an increased contribution limit that is indexed, the program might be more relevant to people. It certainly will be a bonus I think to employers who wanted to match their employee contributions but were running up against the old limit. This will give them more opportunity to do so.

It will also improve the sustainability of SPP over the long term as people are investing more. The variable benefit we’ve introduced will give retiring members more options, and it will allow them to keep going with this tried and true organization well into their retirement.

MySPP  allows members access to their account information whenever they wish, 24/7 on all their devices. That will be attractive to younger prospective members.

Exciting times. Thank you, Katherine. It’s been a pleasure to chat with you again.

Thanks so much, Sheryl.

*This is an edited transcript of an interview recorded 1/31/2018.

Written by Sheryl Smolkin
Sheryl Smolkin LLB., LLM is a retired pension lawyer and President of Sheryl Smolkin & Associates Ltd. For over a decade, she has enjoyed a successful encore career as a freelance writer specializing in retirement, employee benefits and workplace issues. Sheryl and her husband Joel are empty-nesters, residing in Toronto with their cockapoo Rufus.

July 31: Best of savewithspp.com interviews

Over the last 6+ years I have had the privilege of blogging for the Saskatchewan Pension Plan twice a week. That means there are over 500 articles archived on this site that you can access on topics that range from retirement savings to income taxes to how to save money.

Whether you have recently started following savewithspp.com or you have been with us from the beginning, you may not be aware of the wealth of information  in our archives. Therefore, beginning with this week, on an occasional basis I will offer links to some of my favourite “blasts from the past.”

Today’s selection includes a series of savewithspp.com podcast interviews.

I interviewed SPP General Manager Katherine Strutt in both January 2012 and February 2015. “The SPP gives members access to top money managers they may not be able to access on their own. SPP also gives members a strong investment product at a very low price,” Strutt said in the most recent interview. “The costs of running our plan are around one percent or less, and this compares to fees in a retail mutual fund that can be anywhere between two and three percent.”

In a July 5, 2012 podcast Derek Foster, author of several books including The Idiot Millionaire and The Wealthy Boomer explained how he retired at the young age of 34 and supports his wife and five children on $40,000/year. He also talks about the advantages of saving for retirement with SPP as opposed to an RRSP.

The Wealthy Barber David Chilton spoke to us in October 2012 long before he joined and then left the popular CBC series Dragons’ Den. He offered strategies for cutting down on discretionary savings to free up more money for savings. Using cash instead of mindlessly swiping a debit or credit card is one of his favourites.

The 2014 series of podcast interviews featured financial bloggers including Retired Syd who left work behind at age 44. Her original budget for retirement turned out to be overly generous, partly because she was kind of careful the first few years since she was so nervous watching the stock market go down. But as of the date of the interview, she and her husband were still spending less than their original retirement budget.

And finally, after I read most of the books in the Joanne Kilbourne mystery series, in March 2015 I interviewed the author and Saskatchewan success story Gail Bowen.  Also a retired professor and playwright, Bowen’s writing career did not begin until age 45. She is still writing in her 70s – truly a role model for all of us who are pursuing encore careers.


Do you follow blogs with terrific ideas for saving money that haven’t been mentioned in our weekly “Best from the blogosphere?” Share the information on http://wp.me/P1YR2T-JR and your name will be entered in a quarterly draw for a gift card.

Written by Sheryl Smolkin
Sheryl Smolkin LLB., LLM is a retired pension lawyer and President of Sheryl Smolkin & Associates Ltd. For over a decade, she has enjoyed a successful encore career as a freelance writer specializing in retirement, employee benefits and workplace issues. Sheryl and her husband Joel are empty-nesters, residing in Toronto with their cockapoo Rufus.

Hawaii-Not? Saskatchewan Pension Plan Helps Members Travel During Retirement

press-release

Travel is at the top of many people’s wish lists for their retirement. And why not?

Imagine spending your days relaxing under an umbrella on a sandy beach. Perhaps swinging the clubs on a lush golf course. Marvelling at natural wonders while on a hike. Or feeling the breeze on the deck of a cruise ship sailing the world. Spending your retirement doing whatever you wish whenever you wish — wherever you wish — is the dream of many.

“Travel is extremely popular among seniors. Those can be the years to see and do things you might otherwise not have had the time or money to experience earlier in life,” says Jamie Milton, partner of Uniglobe Carefree Travel of Saskatoon, which offers experienced travel agents to plan every aspect of a trip as well as travel insurance and medical insurance to protect travellers.

But wishing will not make your travel dreams a reality. By contributing each month to a pension plan, you can take advantage of time and compounding returns to fund those retirement dreams.

The Saskatchewan Pension Plan (SPP) is there for those in need of a reliable, easy-to-use and easy-to-understand voluntary pension plan. More than 33,000 people have become members of the SPP since it began 30 years ago in 1986.

Thirty years of growth can add up to a sizable amount. Contributing $100 a month with annual investment earnings of eight per cent can grow to $150,030 in 30 years.

“Pay yourself first. Take a little off each paycheque for yourself. You won’t miss it,” says Katherine Strutt, general manager of the SPP.

Strutt encourages those looking ahead to picture the lifestyle they desire during retirement to determine how much income they will need during those years.  Then, contribute regularly as a member of a pension plan like the SPP, which is open to Canadians between the ages of 18 and 71 with available room to make RRSP contributions. The SPP is aimed at the two-thirds of Canadians who do not have a workplace pension plan such as those self-employed or working for small businesses.

It can be hard to think about saving for retirement when the mortgage payment is due, the kids need new sports equipment and the veterinary bill just came in for the dog. But as retirement nears, you can appreciate that your contributions to a pension plan like the SPP means income to fund those travel dreams.

Also See

Martin Firestone: What Snowbirds Need to Know About Travel Insurance
8 ways seniors can travel on a budget
Safe travel tips for Snowbirds
Snowbird? How to winterize your house

How will the ORPP affect Saskatchewan?

By Sheryl Smolkin

At this point it is not clear how the Ontario Registered Pension Plan (ORPP) that will come into effect in 2017 will affect Saskatchewan says Katherine Strutt, General Manager of the Saskatchewan Pension Plan.

“I don’t believe the provincial government is interested in a mandatory pension plan,” she says.

The ORPP is a plan that will require employer and employee contributions to generate additional government benefits in excess of monthly Canada Pension Plan benefits. The average amount of CPP for new beneficiaries in January 2015 was $618.59/month. The maximum monthly CPP benefit in 2015 is $1,065.

Key features of the ORPP as set out in the consultation paper Ontario Retirement Pension Plan: Key Design Questions are as follows:

  • The plan would be phased in beginning in 2017 with the largest employers. Contribution rates would be phased in over two years.
  • Employees and employers would contribute an equal amount, capped at 1.9% each on an employee’s annual earnings up to $90,000. Earnings above $90,000 would be exempt from ORPP contributions.
  • Earnings below a certain threshold would be exempted to reduce the burden on lower income workers.
  • Contributions would be invested at arm’s length from the government. ORPP would pool investment and longevity risk and aim to replace 15% of an individual’s earnings.
  • Participation would be mandatory, but workers who already participate in a “comparable workplace pension plan” would not be enrolled in ORPP. The government says its preferred definition of a comparable plan includes defined benefit and target benefit multi-employer pension plans.
  • Additional conversations will be held on the best way to assist the self-employed.

An article on the International Foundation of Employee Benefits Plans website aptly summarizes some of the controversy that still surrounds the new program:

“The ORPP proposal has raised concerns among many plan sponsors of defined contribution (DC) plans because the government is proposing that they may not be considered comparable workplace pension plans. Many DC plan sponsors say they already provide adequate contributions. If those plans are not considered comparable, some question whether employers will continue them and/or lower their contributions in order to fund both ORPP and a DC plan.

Another concern is that mandatory contributions will reduce take-home pay and may result in the reduction of other workplace benefits. In the paper, the government said “ . . . some employers may take stock of their current approaches and make decisions about the right compensation mix going forward . . .’”

Both the federal Liberals and NDP parties have publicly supported a CPP enhancement. If either of these parties forms the newly-elected federal government in October, Ontario might opt to hold off on ORPP implementation until a similar national program can be adopted.

SPP Flourishing, says General Manager Katherine Strutt

By Sheryl Smolkin

 

Click here to listen
Click here to listen

Hi, today I’m very pleased to be talking to Katherine Strutt, General Manager of the Saskatchewan Pension Plan. Since I first spoke to Katherine for savewithspp.com in December 2010, she has been featured numerous times in print, on radio, and on TV.

But when I realized it’s been four years since I formally interviewed her, I decided it was time to ask Katherine to bring savewithspp.com readers up to date on some more recent SPP developments.

Welcome, Katherine.

Thanks a lot, Sheryl.

 Q: Katherine, how many people are SPP members, and how much money is in the plan?
A: Well, we’ve had a real growth spurt over the last few years. We now have just over 23,000 contributing members and approximately 10,000 retirees. So our total plan membership is 33,332. And these members collectively have $403.8 million in assets. So we’ve had a real growth spurt.

Q: I see from your 2013 annual report that 1,415 new people joined SPP and 801 people transferred funds from existing retirement savings to their SPP account. I was one of them. Has the plan continued to grow at the same rate in 2014?
A: We want to reach a target of 1,500 new members in 2014. As of mid-December we had 1,228 people joining so far this year so we may not quite get to the 1,500 mark, but we’re going to be very close. And in terms of people transferring money in, 981 members have transferred in, so we’re past the limit that we had last year and still growing. We anticipate that that will continue to the end of the year.

Members had until December 31 to transfer money in for 2014 because it’s on a calendar year basis. But in terms of contributions, they can make their 2014 tax year contributions up until March 2, 2015. 

Q: Now I know there have been more middle-aged or older plan members. Are you starting to see the younger people waking up and realizing that they should start saving earlier?
A: Well, the average age last year was around 42 years old, and now it’s down to 40. So that two year drop may not seem like it’s a lot, but it is because that means that we are getting the younger members in.

It’s always a struggle to attract younger members because I don’t think eighteen-year-olds ever think they’re going to be sixty-five and they have other financial priorities. But I believe we’ve made some inroads by advocating they “start small and start now.” You know, you don’t have to wait until you’ve got a lot of money to invest. A little bit consistently saved is the answer.

Q: Because the annual maximum SPP contribution is $2,500, most people have additional RRSP contribution room. Why should they belong to both the SPP and a personal RRSP instead of concentrating all their savings in their own or their company RRSP?
A: That’s a really great question, Sheryl, and we get members who ask that as well. We tell them that the SPP gives members access to top money managers they may not be able to access on their own. SPP also gives members a strong investment product at a very low price. The costs of running our plan are around one percent or less, and this compares to fees in a retail mutual fund that can be anywhere between two and three percent.

So many members tell us that they wish they could put more money into their account because they see value in the product. However, if they have more than the $2,500 contribution room, a lot of them typically contribute both to SPP and to a personal RRSP in order to get the maximum value from their SPP investment.

Q: Employers can offer SPP as a retirement savings option to their employees. Tell me how that works.
A: Employers can set up an SPP pension plan and allow their employees to contribute via payroll deductions. We work with both the employer and the employees to establish the plan at the workplace, and then we handle all the paperwork and communication. SPP makes it so simple for both the employer and the employee to be part of it because we have a dedicated team at our office to help employers. Gail Genest, our Manager of Business Development, works with many companies to help set up SPP in workplaces. So anyone, employer or employee, who would like a presentation about SPP should contact our office.

Q: How many Saskatchewan companies are taking advantage of this easy way to help their employees save for retirement?
A: We saw about a 7% growth in 2014, so I think that’s a testament to Gail getting out there and talking to businesses and creating some awareness. We currently have 303 employers with just over 1,500 employees who are taking advantage of SPP through their workplace. It’s also available on the payroll platform.

Q: You did some interesting research in April 2014 around how important a pension plan is for attracting and retaining employees. Why did you conduct this study and what did you learn from the results?
A: We really wanted to know what employers and employees thought about saving for retirement partly as a way of helping us frame our message to these groups. And we learned that the expectations of the two groups are quite different.

For example, 57% of employees surveyed said a pension plan is very important in deciding a new career opportunity. They also ranked pension plans as more important than cash bonuses. But because employers assumed the opposite there was a disconnect between what employers thought their employees wanted and what employees really wanted.

We also found (not really surprisingly) that only 12.5% of employers surveyed offered a pension plan. Those that offer plans do so because they feel it’s the right thing to do and as a way of attracting potential employees. Most companies that don’t offer a pension plan cited the cost as the main reason.

Q: How would you respond to small employers who say they can’t afford to set up a pension plan because it’s too expensive and too time consuming to administer?
A: Well, it certainly doesn’t have to be that way. Using SPP as an example, it’s very easy to set up. We handle all the paperwork, and the employer simply establishes the payroll deduction and the payment schedule. We handle the employee signup, the questions, the distribution of the tax receipts and statements. I think we take the complexity out of the equation and allow employers, no matter how small, to set up a pension plan. Furthermore, in discussions with employers, we found that offering a pension plan is a very important tool in retaining and attracting staff, especially for the small employer. I think a lot of people don’t expect a small employer to be able to offer a pension plan so it’s a way of helping them distinguish themselves from their competitors.

Q: Do you have sort of a ballpark number of your employers who put some money into the plan to employee contributions? 
A: That’s truly anecdotal because we don’t track that, but I would say half or more.

Q: What happens if someone joins SPP planning to contribute, let’s say, $200 a month but can’t afford to continue contributing for a few months because his car broke down or he loses his job.
A: Life interferes, right? And again, I would have to say that SPP is very flexible in that regard. So contributions can be changed, stopped or started by a member at any time. We know the best approach is to keep contributing, but sometimes it’s just not part of the game plan, and SPP can accommodate those circumstances very easily.

Q: Who determines how members’ contributions are invested, and how can members be sure their money is safe?
A: The plan is governed by a board of trustees, and they are responsible for setting the investment policy and hiring the investment managers. They work with an external consultant to review the investment policy on at least an annual basis, sometimes more often. The board also reviews the managers’ performance on at least a quarterly basis.

Furthermore, we have administrative staff who are monitoring investment performance, and the board reviews it as well. Within the investment policy, the Board has implemented both quality and quantity guidelines. This is a way of reaching the goal of strong returns while controlling risk. Finally, the investment managers invest in companies of the highest quality.

Q: Are there any plan changes or enhancements on the drawing board you can talk about?
A: Well, we’re always looking at our web services and seeing what enhancements we can make in that area. For instance, we often get members looking for their tax receipts or statements online, and we’re certainly looking at how we can enhance that online experience, but only as we can afford it.

We are very mindful that we are dealing with member funds and we must keep expenses as low as possible so that more can be returned to member accounts.

Q: If readers want to find out more about the plan and fund performance, what sources of information are available to them?
A: We have a number of sources: obviously our website, saskpension.com, our blog, savewithSPP.com and our toll-free line 1-800-667-7153, which is available all across Canada. We also encourage members to sign up for our monthly newsletter which is another source of ongoing information.

Q: Thank you very much for talking to me today, Katherine.
A: My pleasure, Sheryl.


This is an edited transcript of a podcast recorded on December 14, 2014.