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 BarberDavid 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.
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.
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.
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.
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.
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.