FAQ: INVESTMENT CHOICEMay 3, 2012
Q. What investment options does the Saskatchewan Pension Plan offer?
A. Saskatchewan Pension Plan (SPP) offers its members two investment choices:
- The balanced fund (BF)
- The short-term fund (STF).
Members are permitted, but not required, to choose how to direct their contributions in the Plan’s funds. The default fund is the BF – if a member does not give us directions, contributions are deposited to the BF.
Q. What are the objectives of the balanced fund?
The objective of the BF is capital accumulation – growing member accounts to provide them with retirement income in a prudent, risk-controlled manner.
The BF diversifies investments between several asset classes including bonds, equities, real estate and short-term investments. As a further diversification tool, the assets of this fund are divided between two investment managers.
Q. What are the objectives of the short-term fund?
The objective of the STF is capital preservation. Therefore, the money is invested in one asset class – Canadian money market instruments. The STF benchmark is the DEX 91-day T-bill Index. This fund operates on a cost-recovery basis.
STF returns will likely be lower than the BF as the objective is to preserve account balances rather than provide long-term growth.
Q. Which fund should you choose?
A. To answer this question you have to gauge what level of risk you’re willing to accept in a given investment. Factors that will influence this include your investment goals and your retirement timeline. Here are some questions and statements to consider when choosing between the BF and STF:
|Balanced Fund||Short-Term Fund|
|Is my main investment goal to seek higher returns and build up the value of my account significantly?||Is my main investment goal to make sure I preserve the money I already have in my account?|
|Do I prefer a mixed portfolio of stocks, bonds, and short-term investments?||Am I willing to accept a smaller return in exchange for less investment risk?|
|How long do I have until I retire?||How long do I have until I retire?|
|If my pension plan takes an unexpected loss, do I have enough time to recover from it before I retire?||If my pension plan takes an unexpected loss, do I have only a short amount of time to recover from it before I retire?|
|Am I comfortable with risk in my portfolio?||Do I need more certainty in my portfolio?|
|Can I tolerate a moderate short-term loss and remain focussed on my long-term goals?||Will a moderate short-term loss seriously jeopardize my future plans?|
|“I’m a long-term investor who can comfortably tolerate a moderate level of risk and can accept a short-term loss along the road to long-term gains.My goal is to steadily increase my account balance through consistently investing in a balanced portfolio over a long period of time.”||“I’m a short-term investor who can willingly trade the opportunity for higher earnings for a less risky investment. My goal is to guard my money and keep my account intact. I am less concerned about earning a high rate of return.”|
It’s a good practice to re-visit these questions periodically when monitoring your investments to ensure that you are still matched with the correct fund. If any of your answers to these questions change, consider whether you want to remain in the fund, or whether a switch would be more suitable. You may wish to seek the guidance of a financial professional for assistance in making your decisions.
FAQ: Employer-sponsored planMarch 22, 2012
Small business owners can increase recruitment and retention success in a competitive labour market by strengthening their employee benefits package. Saskatchewan Pension Plan (SPP) is a smart, simple way to offer pension benefits to employees (full-time, part-time, casual or temporary).
Furthermore, there are tax advantages for employers who make contributions on behalf of employees. Having a pension plan shows you are committed to helping employees save money for retirement. As a true pension plan, money invested in SPP remains locked-in until retirement.
Here are some FAQ about adopting the SPP as your company’s retirement savings vehicle.
Q. How much will it cost me if I add the SPP to my employee benefits program?
A. SPP offers all the benefits of an employer-sponsored pension plan – but you bear no cost for plan administration.
Contributions can be made:
(a) By the employer as an employee benefit;
(b) By the employee through a payroll deduction;
(c) Or cost-shared by the employer and employee.
There are no sales commissions when members contribute or retire and there is no cost to set up your business plan.
Q. I’m very busy. Is SPP complicated to administer?
A. Administration is simple. SPP assists with the initial paperwork and implementation of the Plan. Employers can then receive monthly, quarterly or year-end reports that serve as the reminder for their next contribution. All employees between the ages of 18 and 71 may participate in the Plan, including full-time, part-time, casual and temporary staff.
After the intial set up SPP handles the distribution of receipts and statements to the employees. The employer has no liability for the investment decisions or future pension obligation to their employees. Investment instructions are provided by the employees and SPP directs and monitors the investment managers.
Q. Do I have to contribute every month?
A. You can tailor the plan to your company’s size and budget. Contributions to the Plan can be made monthly or any time of year. There is no minimum contribution, and no obligation to contribute every year. The maximum is $2,500 per year.
Q. Do all my employees have to participate?
A. Unlike plans that require a minimum enrolment before the benefits can be offered, SPP has no minimum. Even if only one employee is interested, you can start an SPP Business Plan – and you can just as easily add members to the Plan at any time.
Q. How is SPP treated for tax purposes?
A. SPP allows your business to put pre-tax dollars into investments for your employees. The employer contributions are deductible as a salary expense and employees may deduct the total contribution within RRSP limits.
Q. What happens if an employee leaves my company?
A. Should an employee leave your company for any reason, they simply take their SPP Plan with them, without any additional paperwork or sign-off for the employer. As Plan members, they can contribute to the Plan regardless of where they live or who employs them.
Q. Is there a waiting period until my employees can participate?
A. Many other pension plans require that an employee work at a company for a certain length of time before they are eligible to contribute. With SPP there is no waiting period; employees may begin participating at the employer’s discretion. Contributions belong to the employee as soon as they are invested.
Q. How do I tell my employees about SPP?
A. SPP will help employers with this. Please contact SPP and arrange for someone to speak to your employees. There are tools available on our website, including a wealth calculator, as well as opportunities to learn more about SPP on our blog (savewithspp.com), Facebook and LinkedIn.
Q. What do I have to do to get started?
A. Each employee will need to fill out a membership application, which is available online, and provide a copy of a proof of age document such as a passport or driver’s license.
Employees are then listed on the “Employer contribution statement” which is also available online. Mail all the paperwork into SPP and we will set up the accounts for each of your employees and an employer number for you.
Contributions for your employees can be submitted by cheque, automatic payment or credit card. Contribution amounts are flexible and voluntary and employers are free to use SPP as an incentive or bonus.
For example, the employer may decide to match an employee $500 per year or may choose to offer SPP as a place for employees to deposit any bonus money. SPP is flexible and can be customized to fit your business!
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.
FAQ: ContributionsDecember 15, 2011
Saving money can be challenging. It is not always easy to be disciplined enough to regularly put money aside for retirement. And even when you are committed to making regular contributions, there are times when life gets in the way and other expenses must take first priority.
That’s why we try to make contributing as easy as possible for SPP members. In the FAQs below we explain more about our flexible contribution options.
Q.1 How do I make my contribution?
A. Contributions can be made in a number of ways:
- Directly from your bank account on the 1st or 15th of the month by joining the pre-authorized contribution program.
- By mail or at your financial institution using a contribution form.
- Online or by telephone through your bank.
- Authorizing payments from your VISA or MasterCard on a pre-arranged schedule.
- Contributing online, by telephone or in person using VISA or MasterCard.
Q.2 Do I have to contribute the same amount each year?
A. SPP is designed to be very flexible and to accommodate your individual financial circumstances. There is no minimum contribution. Even contributing $10 per month will build your SPP account and provide you with additional pension at retirement. The maximum contribution was changed to $2,500 effective December 7.
Q.3 Can I transfer money into SPP?
A. SPP accepts transfers, up to $10,000 per calendar year from RRSPs, RRIFs and unlocked pension plans.
Q.4 Are my SPP contributions tax deductible?
A. SPP contributions are subject to the same rules as RRSP contributions. Your SPP contribution is tax deductible by you or your spouse, if he or she contributed for you. The person claiming the deduction must have unused contribution room for RRSP purposes.
Q.5 Can my creditors access my SPP contributions for outstanding debt?
A. Your money is protected from claim or seizure except in the event of an order under a marital division or an Enforcement of Maintenance Order.
Q.6 Can I take my contributions plus investment earnings out of SPP?
A. SPP is a locked-in pension plan which means your account must stay with the Plan until you are at least 55 years old. In the event of your death, the money in your account will be paid to your beneficiary.
Within six months of joining SPP, you can withdraw your contributions if you decide that you do not wish to participate in the Plan. After six months, the funds are locked in.