All posts by saskpension

Saskatchewan Pension Plan (SPP) and COVID-19

March 17, 2020

As the global COVID-19 public health emergency continues to spread and create challenges for families and businesses worldwide, we wanted to share with you how SPP is addressing many of the same challenges that our members may be facing.

SPP represents over 30,000 members from across Canada and our principal concern is now on prioritizing the most critical operations such as pension payroll and actively monitoring investment managers. We are also focusing our resources so that we continue to remain available to serve our members in this challenging time despite travel restrictions, social distancing and other challenges that impact our traditional ways of doing business.

We have implemented the best practices of business continuity processes and remain prepared to serve our valued members during this time. However, it is important you are aware that our methods of supporting members and employers are changing to reflect the new pandemic guidelines.

Effective immediately, we have postponed all scheduled member and employer presentations in order to follow the social distancing advice issued by the Province. We are also limiting engagement with our members, employers and other stakeholders and encouraging these activities to be conducted by phone or email where possible. As this pandemic evolves, there may be additional changes to how we connect with members and we encourage you to check the SPP website and social media pages for any updates. We will absolutely reschedule any planned large group meetings, workshops or presentations once the threat has passed.

I would also encourage you to seek out information on www.saskatchewan.ca/coronavirus, the Government of Saskatchewan’s dedicated webpage on COVID-19. It includes the most up-to-date information and guidance for all Saskatchewan residents.

Please do not hesitate to contact SPP if you have any questions about your pension plan. We recognize that this may be a prolonged effort and wanted you to be fully aware of SPP’s commitment to continue serving you during this time.

Sincerely,

Katherine Strutt

General Manager

Mar 16: Best from the blogosphere

The big three – divorce, debt and student loans – can hamper your retirement savings efforts

We all like to say that “life gets in the way” is a chief reason why we can’t put money away for retirement.

An interesting piece in Business Insider takes a look at the top three killers of retirement dreams.

First up, the article notes, is divorce. “Divorce impacts all facets of your finances, but it can hit your retirement savings especially hard,” the article notes. That’s because retirement assets, such as retirement accounts and pensions, can be subject to splitting when couples break up, the article explains.

The article, written for a U.S. audience, suggests that retirement accounts “may be divided equally” on marriage breakdown. So you might lose half your nest egg, and if you are the spouse paying support, there’s another expense that can “eat away at your ability to save.”

The article advises those going through a divorce to get their retirement plan rolling again as soon as things have settled.

The second major retirement savings killer is consumer debt, the magazine reports. “While getting out of debt can be tough, it will be even harder to save for retirement with monthly debt payments in the way,” Business Insider tells us. A U.S. study cited in the article notes that 21.3 per cent of those surveyed agreed that consumer debt “prevented them from reaching their savings goals.”

The article suggests focusing on higher-interest credit cards and credit lines first.

Finally, the article says, dealing with student loans is considered the third barrier to retirement. Again, this article is talking about the U.S. situation, but here in Canada, the average student was $27,000 in debt 10 years ago. That number, taken from the Vice.com site is bound to be much higher today. That’s a lot of money for entry-level workers to have to carry.

The article concludes that you can’t predict how your life will go. There’s no surefire way to avoid a divorce, but you can try and limit your consumer debt and where possible, pay down student loans later in life when you are making more.

The article notes that those who start saving for retirement at age 25 tend to have “tens of thousands” more dollars in their retirement plans than those who start at age 35.

If you’re intimidated about taking that first major step into retirement saving, help is on the way via the Saskatchewan Pension Plan. You can start small, perhaps in the days when you’re just starting out and juggling student and other debt, and then ramp up savings when better times arrive. Meanwhile, the experts at SPP are growing your savings for you, at low cost and with an impressive track record of returns. Check them out today!

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, classic rock, and darts. You can follow him on Twitter – his handle is @AveryKerr22

Market update as of March 12, 2020

The current market volatility illustrates the uncertainty facing investors, especially regarding when the markets will recover.  The following information has been provided by the Plan’s investment managers, TD Asset Management (TDAM) and Leith Wheeler Investment Counsel (Leith Wheeler).

TDAM: March 2/20 – Click here for the full article.

“With a number of major market events making headlines, including the S&P 500 Index declining approximately 13% from its recent highs, 10-Year Treasury yields hitting a new record low of 1.18%, and gold set to break multi-year highs, we want to highlight a few important points.”

“As we currently stand the major known unknown is how COVID-19 will evolve.  If the coronavirus doesn’t become a worldwide epidemic, then risk assets will likely recover quickly. But in a worst-case scenario where the outbreak morphs into a pandemic, the resulting market downturn could get somewhat worse.”

“We are of the view that the most probable outcome is the economic impact of the virus will be short lived for the following reasons:

  • As economic activity is suppressed, we believe it is driving global inventory levels to fall rapidly. Low inventory levels should create pent up demand that will boost economic growth in the following quarters.
  • The Peoples Republic of China will move away from financial de-risking and return to aggressive fiscal and monetary easing in order to help ensure a swift domestic economic recovery.
  • It is important to remember that prior to the viral outbreak, the global financial outlook for 2020 was generally positive as market participants felt that the economic momentum had slowly turned the corner after a soft 2019.
  • In addition, and unlike the global financial crisis of 2008, economic imbalances are generally smaller now than a decade ago.
  • And finally, global monetary policy remains highly accommodative.

We expect these factors to support a rebound in capital markets once the virus has run its course or has been contained.”

Leith Wheeler:  March 2/20 – Click here for the full article.

“Why did markets fall?  The most straightforward answer is that markets have become increasingly concerned that the coronavirus (also known as COVID-19) could materially reduce global economic growth.”

 “How did markets fall?  The first place that recession fears show up is in the fixed income markets.  This past week government bond prices rose, showing both a demand for certainty and a view that central bank will need to lower rates further in 2020 in order to support the economy.  The premium required to hold corporate bonds also increased, reflecting investor nervousness about carrying the risk of default – but only rose back to levels seen in recent months.

The recent declines in equity markets have been global in nature, as the coronavirus mutated from a health scare to a financial one.  Both high – and low – quality stocks dropped, irrespective of how exposed they might be to changes in economic growth, how vulnerable they might be to fluctuations in their cash flow (i.e. highly indebted and new cash companies alike), what their growth profiles is, their level of management skill and so on.”

“The coronavirus may  fizzle out in a month, or it could get much bigger.  We could see trade flows normalize, or we could see a further global economic slowdown. “

“[W]hen you are investing for the long term, market fluctuations – even large ones that persist for quarters or even years – will just prove to be bumps on the way to your ultimate goal.  Market corrections are a normal occurrence, but lenders and investors always find a bottom; business builders move on and build again; and markets rise again – ultimately to new highs.”

“As long term value investors, we have the benefit of knowing the value of businesses without the benefit of a stock quote, so our homework pays off when others are losing their heads and selling good companies out of fear.  We use these corrections as opportunities to buy those quality businesses when they’re on sale.  Beyond that, it’s business as usual.”

Please contact our office if you have any questions.

Sincerely,

Katherine Strutt

General Manager

Unless it’s mandatory, most people can’t or won’t save: Gandalf’s David Herle

Much is said and written about the need to get more people to save for retirement, particularly younger folks who typically lack a retirement program at work.

According to David Herle, Principal Partner at research firm The Gandalf Group, and a noted political and retirement commentator, it’s not just younger people who aren’t saving for retirement.

“We know that young people do not think about the end state of their lives,” he tells Save with SPP in a recent telephone interview. “They are focused on their more immediate needs.” Those needs include the cost of education, housing, and consumer debt.

When talk turns to millennials, the Saskatchewan-born Herle points out that their ability to save is hampered by the fact that there are “less jobs, and specifically, less good jobs with pensions and benefits” in today’s “gig economy.”

So not only are young people not saving, neither are old people. No one, he explains, has any extra money kicking around to save for retirement.

Herle says his firm’s research has shown repeatedly that the best way to get people to save is to make it mandatory, with no way to opt out. That way, he says, ensures money is directed to their long-term savings without the individual “having to think about it.”

Otherwise, he notes, getting people to save is challenging. “There’s not a lot of benefit from lecturing people,” he explains.

Asked if there are any public policy options to increase savings, Herle noted one idea from the past that could be revisited – payroll Canada Savings Bond purchases.

In the recent past, you could buy a Canada Savings Bond and pay for it via payroll deductions, a sort of “pay yourself first” option that did encourage some savings. “It might be worth considering bringing it back,” he suggests.

He points to the expansion of the Canada Pension Plan as “the most significant public policy development” in the retirement savings space. Ontario considered bringing in its own pension plan to supplement CPP, but the Ontario Retirement Pension Plan was shelved when CPP expansion got the green light a few years ago, he says.

The other trend he calls “troubling” is the lack of good pension plans in the workplace. For many years most people had a decent pension plan at work, the defined benefit variety which spells out what your retirement income will be. But employers “have started cutting pension plans,” moving to other arrangements, such as group RRSPs or capital accumulation plans where future income is not guaranteed.

He cites the recent labour dispute over pensions involving Co-op Refinery workers in Regina as an example of an employer trying to cut pension benefits for their employees. “If this happens, we could be seeing the end of the line for pensions,” he warns.

“Most people have lost the security of having an employer-sponsored pension plan,” Herle explains. There’s a large chunk of “middle and low-income earners” who are being expected to compensate for the lack of a plan at work with their own private savings.

“Our research found that those aged 55 to 65 – and this is not counting real estate – have more debt than savings. So this is people in the 10-year run-up to retirement,” he says. The lack of savings will force people to use home equity lines of credit, and the “reverse mortgage business is going to take off.”

Debt is restricting the ability to save, and CPP changes “won’t kick in in time for many people.” Herle says he has not heard of any plans to fix the other pillar of the federal retirement system, the taxpayer-funded Old Age Security program. Recent governments have tried to raise the age of entitlement, and a clawback program is already in place to reduce OAS payouts for higher income earners.

The outlook for retirement saving is “a very gloomy picture,” Herle concludes. He blames “a systematic societal failure… where the risk (of retirement investment) has been transferred to employees from employers.”

We thank David Herle for taking the time to speak to Save with SPP, and encourage readers to check out his podcast, The Herle Burly.

It’s true that paying yourself first – directing something to savings and then spending the rest – can work, especially if it is an automatic thing and the money moves before you can spend it. The Saskatchewan Pension Plan has flexible contribution options that include a direct deposit program; you can set it and forget it. SPP also has an option for employers to set up an easily administered pension plan for their employees. Check them out today!

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. He and his wife live with their Shelties, Duncan and Phoebe, and cat, Toobins. You can follow him on Twitter – his handle is @AveryKerr22

Mar 9: Best from the blogosphere

Retirement saving – starting late is OK, and chipping away at it when you can a must

More and more ink (or more accurately, pixels) is being taken up with worried commentary that Canadians aren’t saving enough for retirement, and that our ship of state is sailing into choppy waters.

But a story by the Canadian Press (CP) that appears on MSN News suggests that there’s no need to panic – but there is a need to plan.

The story quotes Dilys D’Cruz of Meridian Credit Union as saying “if you’re 50 you still have 21 years left to contribute (to an Registered Retirement Savings Plan (RRSP)), it is not as dire as you might think.”

D’Cruz tells CP that while people “may be afraid to look at the numbers,” it’s best, as a first step, to get a financial planner and put together a plan.

Take stock of what retirement savings you have, she says in the article. Do you have a workplace plan from current or past employment? Do you have RRSPs?

Next, she tells CP, you need to consider “what you want your retirement to look like” before doing the plumbing work on your plan. “Do you want that big lavish lifestyle of travelling or is it maybe a quieter lifestyle that you want, what does it mean for you,” she says in the article.

The article cites recent research from Scotiabank that found that while 68 per cent of Canadians say they are saving for retirement (62 per cent of those age 18-34 are saving, versus 74 per cent of those aged 35 and 54), only 23 per cent say retirement saving is their top priority.

TD’s Jenny Diplock, also quoted in the article, agrees, saying that while the general rule of thumb for retirement saving is to start as early as you can, “starting at a particular age may not be realistic for some folks.”

She also suggests having a financial plan, but adds that once you commit to saving, the best way to go is to make it automatic. This will “help cement the habit,” the article explains.

As well, when a cost ends – when you stop paying daycare, or a mortgage – that’s a good time to direct more money to retirement savings, the article suggests.

“As your life situation changes and there are changes in your personal circumstances, you may find that you have additional cash flow that can be used to complement your savings plan,” Diplock tells CP.

Summing it all up, it appears the worst thing you can do about retirement savings is to do nothing at all. Save what you can when you can, and ramp up savings as living costs – debt, housing, childcare – fall by the way. As each impediment to saving falls by the way, your freed up cash can be put to use for your retirement plan.

If you’re not someone with a workplace pension plan – or if you are, but want to supplement those savings – an ideal vehicle is the Saskatchewan Pension Plan. You have flexibility with SPP – if you can only contribute a little bit in a given year, you can contribute more later; contributions are variable up to an annual limit of $6,300. Be sure to visit SPP’s site to learn more!

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, classic rock, and darts. You can follow him on Twitter – his handle is @AveryKerr22

Making retirement planning real – Why Me? And No Gold Watch!

A lot of times, we read about what we are supposed to do before and during retirement, and have trouble connecting the dots of good advice.

Author Rick Atkinson has taken a unique and forward-thinking approach to the topic in Why Me? And No Gold Watch! To make all the information more relatable, he turns it all into a story – the story of Sally McBride, a marketing exec who is unexpectedly let go from a good job at age 57.

Sally is initially shocked by the news that she’s been terminated. “Will I be able to find a new job? Who will hire someone who’s 57… am I now facing retirement?”

An overwhelmed Sally does the right thing, however. When faced with a situation she’s not sure how to cope with, she reaches out to friends for advice. Her friend Thelma soothes her initial fears about retirement, that she would be “unproductive” and losing her identity. “It doesn’t have to be that way,” explains Thelma. Retirement, she says, is an opportunity for all of us “to be enthusiastic about their futures and shape (our) destinies.”

The book weaves in quotes from real people about their perspectives on retirement. Rick Hansen is quoted as saying, on goal-setting, that “it should be challenging enough to make you stretch, but not so far that you break.” Another nice feature of this book is that each chapter also contains a worksheet, for you to add in your own perspectives.

Chapters deal with retirement preparedness, working and volunteering, money, health and well-being, and more – almost every facet of life after work.

In the section on money, Sally meets with friends to talk about how to select a financial advisor, who at a high level talks about the need to have a budget. The worksheet pages at the end of the chapter provide you with your own template; so after seeing Sally walk through it, you can next walk through yourself.

After attending to her financial, health, spiritual and social concerns, Sally is feeling a lot more positive. “You’re beginning to build your vision of retirement, and how to spend your time. You’re giving thoughts to your finances… (and) you’re thinking about your health and well-being strategy,” her friend Thelma enthuses. “The more positive images, questions, implicit beliefs and positive self-talk you engage in, the more positive your mindset,” she adds.

“You’re right, Thelma. I’m beginning to be excited about life after work,” Sally replies.

This book is definitely a positive addition to any pre-retirement/retirement library. Author Atkinson’s style reminds us of talking to a friend or parent, the tone is patient, sensible, non-judgmental, and convincing. If you are unsure about retirement, this book is definitely for you.

A good part of any retirement plan – specifically the financial angle – is to put away money while you’re working to use later to finance life after work. The Saskatchewan Pension Plan offers you a full-service retirement savings plan. SPP will grow your savings (they have an enviable track record of growth) and turn them into a series of lifetime payments when it’s time to turn in the name tag. Be sure to check them out today!

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. He and his wife live with their Shelties, Duncan and Phoebe, and cat, Toobins. You can follow him on Twitter – his handle is @AveryKerr22

MAR 2: Best from the blogosphere

New NIA study says we may need to work longer before retiring

New research from the National Institute on Ageing (NIA) entitled Improving Canada’s Retirement Income System sheds some new light on the age-old question of when to retire.

Writing about the research for the Advisor, James Langton sums up the study, by noted retirement experts Keith Ambachtsheer and Michael Nicin, this way – “greater pension coverage, higher savings and longer working lives will all be needed to ensure an adequate retirement for Canada’s aging population.”

The paper, reports the Advisor, warns that “retirement is getting more expensive and harder to achieve.”  The research found that the cost of long-term care in Canada will “triple to $71 billion in the next 30 years.”

So the costs of looking after older folks are going through the roof at a time when “pension coverage has steadily declined, and private saving is proving harder to achieve amid rising costs for housing, education and childcare,” the Advisor notes, again quoting the NIA paper.

The authors of the study also note that even those who do save are doing so in less favourable conditions, the Advisor tells us. “Today, we face historically low bond yields and uncertain equity returns in the face of climate change and political turbulence across the world. This means retirement savers may not get as much help from favourable financial markets as they did in the post-World War II decades,” the Advisor states, quoting from the paper.

The paper reaches the conclusion, the Advisor reports, that three important public policy considerations need to be met. Pension coverage must be increased, savings rates need to be boosted, and there needs to be thought given to ways to incent people to work longer.

Commenting on the same report in a Globe and Mail opinion column, the NIA’s Dr. Bonnie-Jeanne MacDonald elaborates further on these ideas.

“Canada can better keep up with the retirement income systems of other countries by improving the labour-force participation of older workers,” she writes.

“Having more older Canadians working will also increase tax revenue. With Canada’s aging population, it will help ease shortages in labour and skills supply as baby boomers contemplate their exodus from the work force over the coming decade.”

Working later also has an impact on saving, she notes. “If you work longer, you’ll need to save less for retirement. Every year you delay your retirement is one fewer year you’ll need to draw on your savings, and one more year for those savings to grow,” she explains in the Globe article.

The takeaway here is this – you may live for a long time. If you don’t have a workplace pension, you will have to save on your own for retirement. If you haven’t saved enough, you will have to work longer than you planned.

A step you can take on your own to address this problem is joining the Saskatchewan Pension Plan. This is a great resource if you don’t have a workplace plan or are not sure how to invest. SPP does the heavy lifting for you, growing your savings at a very low cost (and with a great track record) and then turning those savings into an income stream at the time you leave the workforce. It’s never too late to get cracking on saving, so check them out today.

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, classic rock, and darts. You can follow him on Twitter – his handle is @AveryKerr22

Retirement isn’t just about money – it’s about making use of all the free time

If you Google “retirement + plan” you will find lots and lots of information about stashing some of your cash in a safe investment haven so you can crack into it in retirement.

But there’s more to retirement than just the money side of things (even though that aspect is very important). Save with SPP took a look around to see how people go about setting goals for retirement – making use of the newfound time they now have, in abundance.

According to the Kiplinger blog, just as you may have created a financial plan for retirement, you also need to make a plan to live out your dreams, and to “make the next 20 or 30 years purposeful.” 

Sometimes, work slots us into roles that aren’t really aligned with what we think we are about, the blog explains.  “Many times, work is what you do and not so much who you are,” states Catherine Frank of the Osher Lifelong Learning Institute in North Carolina. “Retirement is an opportunity to create a life that reflects more closely who you are,” she tells the Kiplinger blog.

The blog quotes one retiree, retired professor Ronald Mannheimer, who decided to work on his fitness, and volunteer, but found he still had gaps in his day. “Keep open time to explore, to perhaps research what you may want to do next,” he tells Kiplinger “But you should be able to look forward to a calendar of activities.”

OK, so we want to spend time doing things that we have always wanted to do. What if we can’t think of any?

There’s a helpful list at Financial Advisor magazine. They suggest becoming a teacher’s aide, working in retail, working as a tour guide, being a driver, volunteering (or working for a non-profit), and athletics, among other ideas.

There are more ideas over at Marketwatch, including “taking up a sport,” getting a hobby, starting a business, and (of course), travel.

The Retirement Field Guide reminds us what not to do – don’t waste time “watching too much TV,” while “having an empty calendar,” or you will find you’ve become a hermit. They offer similar ideas for retirement activities, including learning new skills (say, music), being a mentor, joining or starting a club, and many more.

It’s very, very hard to visualize retirement while you are still working. Very hard.  It’s not like being on vacation. If anything, it’s like every day is the weekend. The advice from the various bloggers cited here is sound – take some time now, while you are working, to think about what you want to do with your hard-earned time. Talk to folks who are already over the wall and enjoying retirement, and you’ll be surprised how busy they have become.

Even doing only things you like often requires a bit of cash. A tremendous resource for creating retirement income is the Saskatchewan Pension Plan. The SPP is pretty unique – it’s an open defined contribution pension plan. You can contribute up to $6,300 a year towards your retirement, and SPP will grow your savings (with professional investing at a low cost) until that wonderful day when you move into fitness and hobbies full time. Then, you can collect those grown-up savings in the form of a monthly, lifetime pension cheque. Check them out today!

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. He and his wife live with their Shelties, Duncan and Phoebe, and cat, Toobins. You can follow him on Twitter – his handle is @AveryKerr22

Feb 24: Best from the blogosphere

Old “rule of thumb” retirement planning go-tos may need adapting: Shelestowsky

A great interview with Meridian’s Paul Shelestowsky in Wealth Professional shows that some of the old standard tenets of retirement planning may not translate as well here in the 21st Century.

An example, Shelestowsky tells Wealth Professional, is the idea that saving $1 million in your retirement kitty is a target we should all be aiming for. But that figure may not be the right target for everyone, he explains in the story.

“StatsCan has reported that close to 40% of Canadians are still working between the ages of 65 and 69,” he states in the article. “Some Canadian adults have their 75-year-old parents living with them; sometimes that means they get help with the finances, but a lot of times they don’t. Similarly, you can’t just assume that your kids will move out when they’re 25 anymore.”

Another rule our parents told us was never to take debt into retirement.

But that’s increasingly difficult to do, Shelestowsky explains to Wealth Professional, in an era where it is common to continue mortgage payments in retirement, and where household debt has reached levels where Canadians are “owing $180 for every $100 they bring home.”

“How can you retire when you’re having troubles getting by with your regular income, and then have to live on 60% of that?” he asks in the magazine article. High levels of debt may explain the greater-than-ever reliance on home equity lines of credit, Shelestowsky tells the magazine.

Planning for retirement is still of critical importance, he says. “Failing to plan is planning to fail,” he notes in the article. Without some sort of savings, he warns, you could be living solely on Canada Pension Plan (CPP) and Old Age Security (OAS) payments, which he says works out to only about $1,700 to $1,800 a month, or $42,000 a year for a married couple.

“The government never meant for OAS and CPP to serve as people’s sole retirement income source,” he states in the article. “Back in the day, people could comfortably sock away an extra $200 a month when they’re 20 or 30 years old; now you could say debt is the new normal. And to have a defined-benefit pension plan you can count on in your old age … that’s almost unheard of nowadays. Companies are shifting toward defined-contribution plans, but even that’s not a staple perk anymore.”

Shelestowsky says a solution is to get the help of an advisor to figure out a pre- and post-retirement budget. For those in poor financial shape, the budget process can turn things around; for others, it is a much-needed source of retirement reassurance, he tells the magazine.

If you have a workplace pension plan or retirement savings arrangement, you have a leg up for retirement. But if you don’t, and aren’t sure how to invest on your own, be sure to check out the Saskatchewan Pension Plan. Through this open defined contribution plan, you can contribute up to $6,300 a year towards your retirement – your money will be grown by professional investors at a very low fee, and when the day comes when you are logging off for the last time and giving back your building pass, SPP can turn those savings into a lifetime income stream.

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, classic rock, and darts. You can follow him on Twitter – his handle is @AveryKerr22

Old Age Security reform has come full circle in the past decade or so

Most Canadians understand the Canada Pension Plan (CPP) – we pay into it, as does our employer, and we can start collecting a lifetime pension from it as early as age 60. But what about the other “pillar” of the federal government’s retirement income program, Old Age Security (OAS)?

The federal government says OAS is available to any Canadian who has lived in our country for 40 years after reaching age 18. If you don’t meet those conditions, you may still qualify under complex “exception” rules.

Currently, the maximum OAS payment  is $613.53 per month, for life. It starts at age 65, but you can choose to defer it for up to 60 months after reaching that age – and if you do, you will receive a payment that is 36 per cent higher.

There is, of course, a big catch to this. If you make more than $75,910, the government will charge what they call an “OAS recovery tax,” or clawback. If you make more than $123,386, you have to pay back all of your OAS payments for the year.

The “conditional” yet “universal” benefit has prompted many to come up with ideas on how to fix it, particularly during the Stephen Harper years.

Back then, a Fraser Institute opinion column in the National Post explained one key problem with OAS. “Unlike the CPP, there is no dedicated fund to pay for OAS,” the column notes. “Benefits are funded with current tax revenues.” Put another way, everyone who pays taxes contributes to OAS, but not everyone gets it – and should higher income earners get it at all, the column asks.

The Fraser Institute recommended lowering the income at which OAS begins to be cut off to around $51,000, with the full clawback moving to $97,000. This, the article suggests, would save the government $730 million per year, since fewer people would receive the full amount.

Another solution – the one that the Conservatives planned to implement – was moving the starting age for OAS to 67 from 65. However, the current Liberal government reversed that decision in 2016, notes Jim Yih’s Retire Happy blog.

But in the intervening years, we have seen debt levels increase dramatically, preventing many of us from saving for retirement. So there are now some arguing for an expansion of the existing system, on the grounds that it doesn’t provide seniors with sufficient income. Indeed, the Liberals campaigned last year on a plan to increase old age security “by 10 per cent once a senior reaches age 75,” reports Global News.

Without getting political, it appears we have come full circle from talk of reforming the OAS and making it harder to get, to talk of increasing its payout for older seniors. Let’s hope governments take a longer-term view of the problem, and focus on ways to better fund OAS – perhaps creating an OAS investment fund similar to what CPP has, one that would make this benefit more sustainable and secure for those who rely on it.

If you are one of the many hardworking people who lack a workplace pension plan, there is a do-it-yourself option that you should be aware of. It’s the Saskatchewan Pension Plan (SPP). They’ll grow the money you contribute to the plan over time, and when it’s time to retire, can pay it out to you in the form of a “made-by-you” lifetime pension. The SPP also has options for your employer to use this plan as an employee benefit.  Check them out today.

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. He and his wife live with their Shelties, Duncan and Phoebe, and cat, Toobins. You can follow him on Twitter – his handle is @AveryKerr22