Talking to Warren WagnerJanuary 26, 2012
My name is Sheryl Smolkin. I’m a pension and benefits lawyer and journalist. Today I’m continuing our series of interviews with the people behind the scene at the Saskatchewan Pension Plan. I’m talking to Warren Wagner, Chair of the Saskatchewan Pension Plan Board of Trustees.
Warren is currently the Regional Director for Saskatchewan of the Canadian Diabetes Association and previously for 35 years he was a Regional General Manager with the Canadian Imperial Bank of Commerce.
Thank you Sheryl.
Q. Warren, what is the Board’s role in the operation of the SPP?
A. Like other pension plans we have a Board of Trustees that is responsible for insuring that the plan acts in accordance with good governance and fiduciary responsibilities. So really our responsibility is to make sure that the members of the plan have their interests protected and the goals and objectives of the plan are carried out.
Q. How are Board members appointed?
A. The Saskatchewan Pension Plan’s Board is appointed on the recommendation of the province’s Minister of Finance. The appointments are then made by an order-in-council of the Saskatchewan government.
Q. How long is the term for each member?
Typically it is three years. Usually people serve on the Board for one or more terms, hopefully to provide their continuing experience and knowledge of the plan.
Q. The SPP is 25 years old this year. What do you think are some of the most important developments over the past 25 years?
A. Good question. First of all, I think the fact that it has been in operation for 25 years is probably one of the most important features of the plan. In the financial industry there are a lot of plans, investments and programs that have come and gone, yet the SPP has proven to be durable, fairly stable and predictable.
When you look at the plan’s history and performance over the past 25 years, the SPP has returned in excess of 8% each year with nominal management fees. So you have a plan that is strong, simple to understand, well-managed and provides the opportunity for people and small businesses in the province of Saskatchewan and beyond to invest for the future.
Q. What is the Board’s vision for the SPP over the next 25 years?
A. What we really see is the opportunity for SPP to expand on the good things it is doing for the individual contributors today but also to become the small business plan of choice going forward.
There are about 70,000 small businesses in Saskatchewan, as an example, and the majority of these do not have a pension plan for their employees. The reality is that employers would like to have something to help their employees, but they need something that is simple, easy to understand, inexpensive and a plan that is not going to require a tremendous amount of their time to administer.
We’re happy to say the SPP meets all those criteria so we think that there is an excellent opportunity for the plan to grow by providing this good pension opportunity for both individuals and small businesses.
Q. Now the contribution levels were increased at the end of 2010. Do you envisage that going forward further increases might be in the cards?
A. At this point we are still very pleased that the contribution level was increased from $600 to $2,500 a year, which is a very significant increase. We’re just in the process of digesting that at this time. However, we have had discussions internally about the need to either look for indexing of that limit or requesting a staged limit increase over the next few years.
Thanks so much for answering my questions today. I’m sure both members and prospective members will be impressed with the sound governance structure in place at the Saskatchewan Pension Plan.
FAQ: Pension paymentsJanuary 19, 2012
SPP members may begin receiving benefits from the Plan any time after age 55 and must be retired from the Plan by the end of the year in which they reach 71. At SPP, “retirement” simply means you are receiving pension payments. You can still be employed and receive a pension from SPP.
You may choose an annuity from SPP and receive a pension for the rest of your life, transfer the funds to a locked-in account with a financial institution, or choose a combination of the annuity and transfer options.
Here are some FAQ about pension payments. For more information, see the SPP Retirement Guide.
Q. How much will my pension be?
A. If you elect to receive a pension, the amount of your monthly payment will depend on which annuity option you choose, your age at retirement, your account balance, and the interest and annuity rates in effect when you retire.
Q. How does an annuity work?
A. A SPP annuity is the easiest way to access your SPP savings. Funds stay invested with SPP – no transfer fee – and the Plan assumes the investment risk and the obligation to pay a pension for your lifetime.
Your annuity choice cannot be changed after payments begin. Each option provides different death benefits. Annuities offered by SPP as well as their features are:
Life Only Annuity
This provides the highest monthly payment with no survivor or death benefits payable. All pension payments stop at death.
Refund Life Annuity
At death your beneficiary receives the remaining account balance. The death benefit is calculated by subtracting total payments received from account balance at retirement. You must specify a person(s) or estate as beneficiary. The beneficiary designation can be updated at any time before your death.
Joint and Last Survivor Annuity
At your death, your surviving spouse or common-law partner receives a monthly payment for the rest of his or her life. The continuing benefit for your joint survivor is 100%, 75%, or 60% of your monthly pension, as chosen at retirement.
Q. Can I transfer my money out?
A. At retirement time, one of the options is to transfer your account to a Locked-in Retirement Account (LIRA) or a prescribed RRIF with another financial institution.
Q. Can I get my money out in a lump sum?
A. If you have a small pension benefit of $20.88 or less per month at your retirement date, you may choose to take your money out in cash less a 10% withholding tax (sent to Canada Revenue Agency) or transfer your account into an RRSP.
Pay yourself firstJanuary 12, 2012
By Sheryl Smolkin
Saving for retirement is hard. You fully intend to put away a percentage of every paycheque but mortgage payments, car payments and new shoes for your children get in the way. When you have a few dollars in your pocket after paying the bills, travel and the latest tech toy are powerful magnets.
But you can make saving much easier, by adopting one simple financial planning principle: “Pay yourself first.”
“Pay yourself first” as a cornerstone of investment philosophy was popularized in this country by David Chilton, the renowned author of The Wealthy Barber. Simply put, it means that before you pay your bills, before you buy your groceries, before you do anything else, set aside a portion of your income to save. The first bill you pay each month should be to yourself.
Decide on the purposes for which you want to save and the amount you want to save each pay period. Then arrange for automatic withdrawals by your bank or other financial institution.
Here are three reasons why paying yourself first makes sense:
- You are making savings a priority. You are telling yourself that your future is just as important as all of the current expenses you are responsible for.
- You are developing sound financial habits. Most people spend money in the following order: bills, fun, savings. By putting savings first, you put the money aside before you find reasons to spend it.
- You are building a cash buffer. Regular cash contributions are an excellent way to build a retirement nest egg. You can also allocate a portion of your savings for an emergency fund or to purchase a home. Paying yourself first gives you the freedom to choose.
You can even use the tax system to “Pay yourself first” and get a raise. If you are saving regularly in the Saskatchewan Pension Plan or a registered retirement savings plan, you can complete a T1213 form and request permission for your employer to deduct a lower amount of taxes at source,
By reducing your withholdings at source, you are paying yourself and not the Canada Revenue Agency first, and increasing your net take home pay. You are effectively giving yourself a raise all year long, not just once at tax time.
You can contribute up to $2,500/year to the Saskatchewan Pension Plan and contribution options include directly contributing from your bank account on a pre-authorized contribution schedule.
Developing the “Pay yourself first” habit can help you build up a substantial retirement nest egg. For example, if you deposit $2,500/year in the SPP and earn five percent over a 40 year career (age 25 to 65) you will have a lump sum of about $317,000 in your account.
For additional retirement or other savings, you can also direct your financial institution to transfer regular amounts to savings vehicles like tax free savings accounts and registered retirement savings plans.
Talking to Katherine StruttJanuary 5, 2012
My name is Sheryl Smolkin. I am a pension and benefits lawyer and journalist. Today I’m kicking off our series of interviews with the people behind the scene at the Saskatchewan Pension Plan. I’m talking to Katherine Strutt, the General Manager of the Plan.
Welcome Katherine. Thanks Sheryl.
Q. Who can join the SPP?
A. Anyone between the ages of 18 and 71 can join the plan no matter where they live or work. So while most of our members are from Saskatchewan, anybody from the rest of Canada can also join and be part of the plan.
Q. Why do Canadians need a pension plan? Most of us are eligible for CPP and OAS, plus anyone with a house effectively has a chunk of savings.
A. Well, if you think of retirement savings in Canada as a three-legged stool, on the first leg you have Old Age Security which is a universal program. On the second leg you have the Canada Pension Plan which is a workplace-based pension. And those two are the foundation for most people’s retirement savings. The third leg is individual retirement savings and that’s where the SPP fits in.
So it’s important to have some personal savings and the SPP provides a vehicle which is easy to use and gives members a strong return at a very low cost. Your home is a very important part of your personal savings but you cannot necessarily rely on that as your main source of funds for retirement.
Q. With an alphabet of savings options, why do you think Saskatchewan residents and other Canadians should consider the SPP as part of their retirement savings strategy?
A. Well as I said, the SPP is simple and easy. We provide members with a true pension plan. That’s the difference between us and a Group RRSP. And you can’t get that anywhere else on a personal basis. Members get access to a large institutional plan for a fee of about one percent or less.
This would compare very favourably to retail mutual funds which typically would charge anywhere from 2% to 3%.
Q. How much can each member contribute?
A. Each member can contribute up to $2,500 per year based on their own individual RRSP limits. They can transfer in another $10,000 each year from an RRSP, a RRIF or an unlocked pension plan.
Q. How does an individual know where to put his money first – pay off debt? SPP? RRSP? TFSA? It’s a challenge to figure all of these out.
A. It sure is, and it is certainly a very individual decision, but I believe it isn’t an either/or proposition. People can be paying down their debt the same time as saving for their retirement through the SPP. As their financial situation improves, they can increase their contributions to the SPP.
Q. What if a plan member can’t afford to make contributions because of unexpected other expenses?
A. That’s where the SPP is so flexible. If people need to stop making contributions for a while and then start up again, they can do so without penalty. It’s very flexible and very easy to use.
Katherine, thanks so much for taking the time to talk to me today. I know both members and prospective members will be very interested in your answers to my questions.