Nov 30: BEST FROM THE BLOGOSPHERE
November 30, 2023
SPP: one of Canada’s largest multi-employer DC pension plans
She notes that defined contribution (DC) pension plans, such as SPP, have been evolving over the years.
“When my parents began their working lives in the early 1970s, they both had defined benefit (DB) plans, though the outcome for each was quite different. Since my mom retired, she’s been drawing down an income from the Ontario Teachers’ Pension Plan, while my dad spent the first decade of his retirement fighting for his pension after his employer Nortel Networks Corp. entered insolvency,” she explains.
(The difference between a DC plan and a DB plan is basically what’s defined. With DC, the contributions going into the plan are usually pre-determined, a set percentage of your pay sometimes matched by the employer. With DB, the pension coming out of the plan is what’s defined – contributions made by your and your employer can vary in order to deliver the “defined” benefit.)
Paterson writes that DB plans are “few and far between” in the private sector these days. Apart from a brief time belonging to a DB plan, she has “spent my career saving into either a DC plan or a group registered retirement savings plan.”
As boomers with DB plans retire, writes Paterson, “membership in Canada will continue to shift” to DC. “DC plan account balances are growing and the industry has to figure out how to improve both the accumulation and decumulation phases to meet this reality,” she explains.
While large public sector pension plans – she mentions the Healthcare of Ontario Pension Plan – tend to be “multi-employer” pension plans (MEPPs), meaning you can change jobs among participating employers and still keep the same pension plan, it’s rarer to see that in the DC sector, writes Paterson. “DC plans have traditionally been single-employer plans,” she continues.
But there is a DC plan that is also multi-employer, Paterson writes – the SPP.
“Consider MEPPs’ various benefits: economy of scale, pooled assets, reduced costs and shared risks. These benefits drew me to one of Canada’s largest MEPPs, the Saskatchewan Pension Plan, which is No. 21 in the 2023 Top DC Plans Report,” she writes.
Even if you change jobs, you don’t have to stop contributing to SPP – it travels with you as you move through your career.
“Since I knew it was unlikely I’d ever have the security of a public sector DB plan, I opted for the next best thing when I started building my family a couple of years ago. Through my workplace, I only have a group RRSP with a very low employer match, so I looked into saving in the SPP, which had recently expanded beyond Saskatchewan to open up to all Canadians,” she continues.
“Since I typically prefer to have some level of control over my finances, I’m still a bit surprised how comfortable I am as an SPP member, where I’ve set my investment choices, picked a monthly contribution that comes straight out of my bank account and basically stepped away. But there are many unknowns in the world and so much to manage, I appreciate that the SPP team takes the reins and I trust the work they’ve put into their investment options,” writes Paterson.
In addition to letting SPP handle the investment side, Paterson likes the options the plan offers on the trickier “decumulation” side, where retirement savings are converted into retirement income.
“The SPP’s focus on decumulation was another big reason I joined. For years now, I’ve been hearing about the Canadian pension industry’s very slow approach to solving this problem — and also saw how the SPP has been leading the way,” she writes.
“When I eventually retire, I want the comfort of keeping my savings in the same plan and the same investments, benefiting from the same pooling and risk-sharing I did in the accumulation phase. I’m not interested in the isolation and exorbitant fees of the retail environment — and I don’t think anyone near retirement who knows anything about finances should be comfortable with that transition,” writes Paterson.
She notes that members can now transfer all of their other savings – “my group RRSP, for example” – into SPP when they retire, in order to have all their assets in one account.
“Since I joined the SPP, I’ve been an advocate, promoting plan membership to all of my friends who either don’t have a workplace plan or have an inferior one like I do,” she concludes.
We can add one personal bit of SPP information – the “decumulation” options also include a lifetime monthly annuity pension that you can get within the plan. Here at our house, one of us is already receiving an SPP annuity, and we will both be doing so once this writer hits the big 6-5.
Great news! SPP’s flexible Variable Benefit option is no longer limited to those members living within the borders of Saskatchewan. Now all retiring SPP members across the country can take advantage of this provision, which puts you in control of how much income you want to withdraw, and when you want to withdraw it. You can also transfer in additional savings from other unlocked registered sources. For full details see SaskPension.com.
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Written by Martin Biefer
Martin Biefer is Senior Pension Writer at Avery & Kerr Communications in Nepean, Ontario. A veteran reporter, editor and pension communicator, he’s now a freelancer. Interests include golf, line dancing and classic rock, and playing guitar. Got a story idea? Let Martin know via LinkedIn.