We often hear how scarce good workplace pensions are, and how many employers, notably those in the private sector, have given up on offering them altogether.

But, according to Derek Dobson, CEO and Plan Manager of the Colleges of Arts and Technology (CAAT) Pension Plan, there is an option for any Canadian employer that doesn’t want to go through the effort and expense of managing a pension plan for their employees. That option is CAAT’s DBplus plan.

Dobson tells Save with SPP that there are three main themes as to why some employers – with or without their own pension plan – might want to look at DBplus.

Running what is called a “single employer” defined benefit (DB) plan means the risk of ensuring there’s enough money invested to cover the promised benefits rests on the shoulders of one employer. In a multi-employer plan, however, many employers are there to shoulder the load – the risk is shared.

As well, he notes, it might be a chance to upgrade pension benefits. “A lot of organizations want to have access to something better for their people… some employers offer nothing, or a group RRSP. Now they can move to a modern DB plan,” Dobson explains. One study by the Healthcare of Ontario Pension Plan (see this prior Save with SPP post) found that most Canadians would take a job with a good pension over one that pays more, Dobson notes.

A final benefit, he says, is the ability that DBplus has to move all employees to a common retirement benefit platform. “In many organizations, you may find that one group of employees has nothing, one has a defined contribution plan, others have a DB plan that is now closed to new entrants… DB plus allows you to put everyone on the same platform,” he says.

Noting that another large pension plan – Ontario’s OPSEU Pension Trust – has launched a similar program for non-profit organizations, Dobson says the idea of leveraging existing pension plans to deliver pensions to those lacking good coverage “is great…the long and the short of it is that there’s a general belief that these larger plans want to put up their hands to help where they can.”

“It’s the right thing to do,” he says.

Why are pensions so important?

Dobson points out some key reasons. “The average person these days will live to age 90, and on average, they retire at age 64 or 65,” he explains. “That’s 25 years in retirement. So having a secure, predictable income, one with inflation protection and survivor pensions, and that is not being delivered for a profit motive – that’s why these plans are so powerful.”

Another great thing about opening up larger plans to new employers is that it addresses the problem of “pension envy,” Dobson says. Instead of pointing out who has a good pension and who doesn’t, now “everyone has access to one, to the same standard.”

Those without a pension have issues to face when they’re older, he warns. “The Canada Pension Plan and Old Age Security systems weren’t designed to be someone’s only source of income,” he explains. “We had a three-pillar system in the past – CPP, OAS, and the third pillar, your workplace pension plan and your private savings,” Dobson says. But a large percentage of Canadians don’t have pensions at work, and a recent study by Dr. Robert Brown found that the median RRSP savings of someone approaching retirement age is just “$2,000 to $3,000,” Dobson says. Yet the same study found Canadians are willing to try and save 10 to 20 per cent of their income for retirement.

Dobson says he is energized by the goal of bringing pensions to more Canadians. “It’s a way of making Canada better,” he concludes.

Here’s a video about how the CAAT pension plan delivers on benefit security.

We thank Derek Dobson for taking the time to speak to Save with SPP.

If you don’t have a workplace pension, or the one you have offers only modest benefits, don’t forget the Saskatchewan Pension Plan. SPP allows you to decide what your savings rate will be, grows those dollars at a very low management rate, and can convert the proceeds to a variety of lifetime pensions when you retire. Check them out today.

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Will pandemic make us rethink our retirement plans?

Financial author Alexandra Macqueen, writing in MoneySense magazine, notes that we’ve always planned for retirement based on the assumption that things will be pretty much stable between the “now” of working and the “then” of retiring.

But, she asks, how will things change when the “now” is totally thrown into chaos by the pandemic?

Up until recently, she writes, we have thought about early, late, or part-time retirement. “All of these variations on the retirement theme have been built on a relatively steady set of economic conditions and assumptions: that housing and financial markets will remain stable, the economy will continue to function, and Canadians will continue to pay the Canada Pension Plan premiums and income taxes that keep CPP and Old Age Security payments flowing,” she explains.

But, she writes, the global pandemic and its “resulting economic fallout… could reshape retirement in Canada.”

First, she says, the idea of early retirement has always been associated with the idea that there are “fallbacks” if things don’t go smoothly – “returning to paid employment, harvesting home equity or counting on continued asset growth.”

But if jobs are scarce, property values drop and “markets tumble,” Macqueen notes, “these backup plans may not be available. As a result, more Canadians may opt to remain in their paid employment (if they’re employed) longer.”

As well, Canadians may find work hard to come by generally, and if they work part-time or via “gigs,” retirement savings will also be difficult to come up with, another reason Macqueen gives for seeing fewer early retirements going forward.

The next big change Macqueen predicts is that of Canadians finally coming to terms with their debt.

“The economic fallout from COVID-19 also means that many highly indebted Canadians will need to take a fresh look at the spending that got them where they are, because the security of the income or assets they expected to use to retire the debt has diminished or even disappeared,” she explains.

With no investment returns to pay down debt with, and with housing prices uncertain, Canadians may be forced to downsize their primary residence purely to save on mortgage costs, cut back on big vacations and fancy home renovations, or in extreme cases enter “a consumer proposal or bankruptcy proceedings to resolve outstanding debt,” she warns.

Finally, the COVID-19 era and its volatile market may result in a return to simpler and less risky retirement finances, such as guaranteed investment certificates (GICs) and annuities.

GICs carry almost no risk – they pay out a set amount of interest depending on the term of the certificate.

“A life annuity is a financial product, sold by an insurance company, that pays a guaranteed monthly income to the annuitant(s) for as long as they are alive—sort of like a “DIY version” of a defined-benefit pension,” notes Macqueen, co-author of a book on the subject, Pensionize Your Nest Egg.

Summing it up – we may need to work longer to have enough savings to retire on, or to pay off debt first before retiring, and when the wonderful day arrives, we might want to convert savings into a guaranteed lifetime income via annuities and GICs.

If you’re a member of the Saskatchewan Pension Plan, the idea of converting your retirement savings into a guaranteed lifetime income stream is already part of your retirement tool kit. SPP has a variety of annuity options available that will ensure you get a monthly cheque for as long as you’re alive. Check it 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

It’s often said that Canadian seniors are doing fairly well, and that the rate of senior poverty experienced back in the pre-Canada Pension Plan days has dropped considerably.

However, says Ottawa-based union researcher John Anderson, the yardstick used to measure senior poverty levels needs to be updated to international standards. He took the time recently for a telephone interview with Save with SPP.

Currently, says Anderson, a “Market Basket Measure” (MBM) system is used to measure the cost of living, a “bizarre” system that factors in the cost of housing, clothing, food and other staples by province and region. By this old system, it is reckoned that 3.5 per cent of Canadian seniors live in poverty, although recent tweaks to the measurement process will see this number jump to 5.6 per cent.

The intricate MBM system – unique to Canada — goes into arcane details such as “what clothes you should have, how many pairs of long underwear, what kind of food you should buy, how many grams of butter. And there’s a sort of built-in stigmatization of rural living; it’s assumed that you don’t need as much money to live in a rural area as you do to live in Toronto,” Anderson says. The opposite is often true, he points out.

LIM system a better comparator

Anderson says the rest of the world uses a different measurement, one that’s much simpler, Anderson explains. The low income measure (LIM) scale defines poverty as being “an income level that is less than 50 per cent of the median income in the country,” he says. “This gives you a very clean comparison.”

By that measure, a startling 14 per cent of Canadian seniors are living in poverty, which is more than triple that figure that MBM currently quotes. “When you think about it, it means they are making less than half of what the average Canadian earns,” he explains. “They are not earning a lot.”

Why are today’s seniors not doing so well? Anderson says there has been a decline in workplace pensions over the years. “The numbers are way down,” he says. As recently as 2005, there were 4.6 million Canadians who belonged to defined benefit plans through work. By 2018, that number had dropped to 4.2 million, “at a time when we have seen a significant increase in the population, and more seniors than ever before.”

Defined benefit plans are the kind that guarantee what your monthly payment will be. About two million Canadians belong in defined contribution plans, which are more like an RRSP – money contributed over a working person’s career is invested and grown, and then drawn down as income in retirement.

“Only 25 per cent of workers have defined benefit plans now. And only 37 per cent have any kind of registered pension plan. Most have nothing,” says Anderson. This lack of pensions in the workplace, and the tendency towards part time and “gig” work that offers no benefits, is a primary reason why senior poverty is on the upswing, he contends.

“The kinds of jobs people are in today have changed,” Anderson explains. “People are working more non-standard jobs, gig jobs, contract work. Many are not even contributing to the CPP.” They tend not to be saving much on their own with these types of jobs, so it means that “when they retire, if they work that way, they don’t get much of a pension.”

That will leave many people with nothing in retirement except Old Age Security and the Guaranteed Income Supplement, Anderson says. Neither the OAS or the GIS has “really kept up” with increases in living costs. The most anyone can get from these two programs is about $1,500 a month, for a single person, he says. “These major government pension plans have not yet taken a leap forward,” he says. “The government has improved the Canada Pension Plan, and people will benefit from that (in the future),” he explains, but these other two pillars should get a look too.

Looking forward

Anderson says by moving to a LIM-based measurement of poverty, governments could have a more realistic basis on which to make program improvements.

“We already have a form of universal basic income for seniors through the OAS and the GIS,” he says. “The monthly amounts these pay out need to be raised.”

The goal should be to raise income for seniors to the LIM target of 50 per cent of Canada’s median income which is $30,700 per person based on median after tax income for 2018.

He also thinks that the OAS should be an individual benefit, rather than being designed for couples or singles. “You get less per person with the couples’ benefit; people should get the same amount,” he explains.

He says seniors today face an expensive retirement, with possible time spent in costly long-term care homes. “Can I survive when I retire – this isn’t a question that our seniors should have to worry about,” he explains.

Anderson remains optimistic that the problem will be addressed. The Depression prompted governments of the day to begin offering OAS; experience during and after the Second World War led to the introduction of EI and the baby bonus. CPP benefits started following a serious period of senior poverty in the 1950s. “We have to do better, but maybe there’s a silver lining with the COVID-19 situation, and maybe government will take a closer look at this issue again,” he says.

We thank John Anderson for speaking with Save with SPP. John Anderson is the former Policy Director of the federal NDP and now a union researcher.

If you don’t have access to a workplace pension, consider becoming a member of the Saskatchewan Pension Plan. It’s an open defined contribution plan – once you’re a member, the contributions you make are invested and grown over time, and when you retire, you have the option of turning your savings into a lifetime monthly pension. 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

If a farmer brought 64 rabbits to a deserted island, and left them alone to multiply, 60 years later there would be an astonishing 10 billion rabbits living on the island.

That example is how Ajax author Robert R. Brown explains the need for all of us to save early in our RRSPs, and then leave the money alone to grow.

Brown’s book, Wealthing Like Rabbits, uses lots of great metaphors and examples to drive home key points about not only saving, but avoiding debt and overspending.

Retirement savings grow in importance as you age, he writes. Given that the Canada Pension Plan and Old Age Security deliver only a modest benefit, “it is better to be 65 years old with $750,000 saved than it is to be 65 years old with $750 saved.”

Canadians have two great options for retirement savings, “the RRSP – don’t pay tax now, grows tax-free inside, pay taxes later,” or the TFSA, “pay taxes now, grows tax-free inside, don’t pay tax later.” Either vehicle, he writes, “is an excellent way to save for your long-term future,” and ideally we should all contribute the maximum every year.

Yet, he writes, just as his beloved Maple Leafs “swear that next year they will do better,” Canadians all swear they will put more money away for retirement, yet don’t.

If you do save, explains Brown, pay attention to the cost of investing. Many mutual funds have high management expense ratios, or MERs, that “range from around two per cent to three per cent. That doesn’t sound like a lot, but it is,” he warns. It’s like the power of compound interest, but in reverse, Brown notes. Index funds and ETFs have far lower fees, allowing more of your money to grow, he points out.

Brown’s key takeaway with retirement saving is “start your RRSP early. Contribute to it regularly. Leave it alone.”

The book takes a look at the ins and outs of mortgages, and why it isn’t always the best idea to get the biggest house you possibly can. Watch out, he warns, when you go for a pre-approved mortgage at the bank – they may offer you an amount that is more than you want to afford. “You shouldn’t ask the bank to establish the amount you’ll be approved for. That needs to be your decision. After all, McDonald’s sells salads too. It’s up to you to order one,” he explains.

Credit cards are another way to pile up debt, he says. Not only are the posted interest rates high, “as much as 29.99 per cent,” but there are late payment fees, higher interest rates and extra fees for cash advances, annual fees just to have certain cards, and more. “Credit card companies are always looking for some sort of new and innovative way to jam you with a fee,” he advises. The 64 per cent of Canadians who pay off their credit cards in full each month enjoy an interest rate of zero, he writes – “think about that.”

He provides some great strategies for the 36 per cent of us who carry a balance on their cards, including leaving the cards at home, locking them up or freezing them to cut back on use, and cutting back on the overall number of cards.

Home equity lines of credit, which are easy to get, can backfire “if you have to sell your house during a soft market,” he warns.

Finally, Brown offers some sensible advice on spending – don’t eat out as often, and avoid alcohol when you’re out. Consider buying a used car over a brand new one. “If spending cuts alone won’t provide you with the cash flow you need to pay off your debt, you’re going to have to make more money,” he says. Get a raise, or get a little part-time job like dog walking, lawn mowing, or washing cars.

This is a great read – the analogies and stories help make the message much easier to understand. Once you’ve set the book down, you feel ready and energized to cure some of your worst financial habits.

If you are looking for a retirement savings vehicle that offers professional investing at a low MER, consider the Saskatchewan Pension Plan. SPP has a long track record of solid investment returns, and the fee is typically around one per cent. That means more of the money you contribute to SPP can be grown into future retirement income.

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

With CPP, the longer you wait, the more you’ll get

For quite some time now, the Canada Pension Plan (CPP) has been available as an early retirement benefit – you can get it, with a reduction for taking it early, at age 60.

But is taking it at 60 the “no brainer” many seem to think it is?

An article in the Flin Flon Reminder suggests otherwise.

The article, quoting financial advisers, says it rarely makes sense to take CPP at 60, and “there are even fewer reasons to start drawing retirement funds while you’re still working.”

“I don’t advise taking CPP until you’re actually retired,” states Willis Langford, a Calgary-based investment planner, in the article. He adds that CPP, along with Old Age Security (OAS), “form the very base of a retirement income plan and you shouldn’t tap into it until you’re ready to start accessing all of your sources of income in retirement.”

Yet, the article notes, about 12.6 per cent of all CPP beneficiaries are taking their benefit early, and face a reduction in the benefit of 36 per cent – “0.6 per cent per each month… before you turn age 65,” the article explains. Those who can wait until age 70 to start CPP get an increase in their benefit of 42 per cent – 0.7 per cent for each month after age 65 that they are not collecting the CPP.

The article explains this with a couple of examples. Someone earning $50,000 a year would get $10,760 in CPP benefits ($897 per month) if he or she starts at age 65. If the same person starts at age 60, they would get “just $551 per month – about $6,600 a year.” As well, if the early collector continues to work while they receive CPP, they would have to make $2,300 a year in CPP contributions.

These extra contributions would boost the CPP benefit at age 65 to $658 a month ($7,896 a year) – still much less than what you get if you start at 65, the article notes. And if the person waits until age 70, he or she would get $1,422 per month ($17,064 a year).

Why, the article asks, do some folks take it early, given all this?

“If you knew you were going to live for a very, very long time, generally you would wait. The longer you wait, the more you would get,” Brad Goldhar of BMO Private Wealth tells The Reminder. “But if you knew at age 60 that your family history suggested not many years of longevity, you might take it early,” he states.

The bottom line – be sure you know the rules for CPP when you’re thinking about taking it.

Similarly, if you are a member of the Saskatchewan Pension Plan, and decide on a life annuity when you retire, be sure to get an estimate. Just like with CPP, the later you start your annuity, the more you will get per month. And generally speaking, more is usually a good thing when it comes to retirement income.

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

A decade ago, Save with SPP was in the audience to hear Sherry Cooper present the chief findings of her then-new book, The New Retirement.

A lot has happened since then, but the noted financial writer’s thoughts stand up well a decade later.

Cooper was among the first to predict that boomer retirements would be different from those of their parents. “Boomers see retirement as a period of regeneration rather than degeneration,” she notes.

However, she adds, boomers are far less frugal than their parents. “Early boomers were the first in their generation to enter schools, the job market, and the housing market,” she explains. Late boomers “had very different life experiences and have found it tougher to amass wealth.”

Cooper noted early that women generally are in better health than men, and as a result, will live longer – a key retirement income consideration. That fact, she writes, “is all the more reason why women should understand their household finances and have a large-enough next egg and long-term insurance to assure comfort and security in later years.”

The author, an economist, correctly notes that people would tend to work later than expected. “Older workers have higher productivity and deal with problems more effectively than younger workers,” she writes. At the event Save with SPP attended, a slide showing Mick Jagger popped up when this point was raised, and it’s interesting to note that Sir Mick is still rocking his way into yet another decade.

She anticipated the need to expand the CPP, noting that back in 2008, CPP was “far less generous than Social Security. In today’s dollars, maximum annual CPP payments are only $10,365.” She pointed out that Old Age Security provided about half as much at maximum and is subject to clawbacks for some.

Other correct prophecies – increased private spending by boomers on healthcare, such as the “considerable burden of long-term care,” plus costs to society for the increasing number of retired boomers needing medical care – are made.

Cooper advocates pre-retirees to adopt a “lifestyle plan for retirement,” indicating that knowing how you want to live will tell you how much you need to fund that particular lifestyle. She says we should think of retirement as a “multi-stage” event, decades long, so planning ought to consider what you’ll be doing in your 60s versus 70s, 80s and 90s.

She talks about the “financial nightmare” of longevity risk, the danger of outliving your savings, and was one of very few financial experts at that time period who talked about the value of having annuities as part of your retirement plan.

The book also sets out a “default” investment portfolio for retirement savers – 15 per cent of the nest egg should be invested “in high quality stocks and real return bonds,” and 85 per cent equally invested in stocks and bonds. This, she says, should get you to age 85, and at that point, you can annuitize what’s left for lifetime income.

This book was one of the first Save with SPP added to our retirement library, and it stands up very well today. It’s a well-recommended read, beautifully and clearly written with frequent recap sections to make sure you’re following along.

It’s true that government benefits, while improving over the years, still don’t provide much more than a basic retirement income for Canadians. If you have retirement savings of your own, or through a workplace pension plan, you’ll have more income for the decades-long retirement phase of life. A good way to augment your retirement savings is by joining the Saskatchewan Pension Plan, a do-it-yourself open defined contribution plan. You provide the money, SPP will grow it over time and provide you the option of a lifetime pension at retirement. All good.

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

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

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 21^st 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

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

As a Bay Street pension lawyer, Jean-Pierre Laporte often wondered why some people – public sector workers, union members – had access to great pension plans at work when many other hard-working people didn’t.

“That’s when I got the idea of taking the existing pension laws, and repackaging them at a micro level so people in the private sector got access to a good pension too – what’s good for the goose is good for the gander,” Laporte, CEO of INTEGRIS Pension Management tells Save with SPP.

The result is the Personal Pension Plan (PPP®), a design that offers a tailor-made pension plan for participants. The PPP® is essentially a pension plan where the individual running the plan is also a plan member, he explains. It is a “combination pension plan” that offers both a defined benefit (DB) pension and a defined contribution (DC) pension – and “the ability to move between the two options,” he explains.

It runs just like a big public sector pension plan would, with a statement of investment goals, actuarial filings, regulatory compliance, and even an additional voluntary contribution (AVC) feature for consolidating existing RRSPs with pension assets, he explains. Its combination design “allows one to shift away from the… DB mode of savings and into a money-purchase, or DC mode every year, if necessary.”

This could be ideal for situations where an entrepreneur is running a PPP® at the same time as a business – if sales are down, the company can “gear down” and shift into a less expensive DC pension mode, and can “gear up” when better times resume, he explains.

This design “optimizes tax deductions across a number of dimensions” that can’t be done with other savings vehicles, such as RRSPs or conventional DB plans like the Individual Pension Plan (IPP).

PPP® contributions can be much, much higher than RRSP contributions, which are capped at 18 per cent of earned income. This can allow PPP members to transfer hundreds of thousands more dollars into their PPP than they could to an RRSP in the run-up to retirement, he notes.

Other PPP® features include a wider range of investment options (including direct ownership of real estate), the ability to top up the PPP® with special payments if returns from investments are lower than expected, the deductibility of investment management fees, interest if borrowing, the ability to “turn on” the PPP® early for early retirement, and more.

As well, while the PPP® may be funded by an individual’s company, the PPP® assets are separate – so they are creditor-proof and not factored into a corporate (or individual) bankruptcy. Those setting up a PPP® for a family business can sign up family members as members, transferring the pension savings along to future generations without any “wealth transfer” taxation, he explains.

“It is for all of these reasons that the PPP® crushes the RRSP as the option for saving for retirement,” Laporte says.

While the PPP® is not intended for everyone, it is an option for a fairly broad group, Laporte explains.

“The pool of potential clients is broader than just self-employed professionals and business owners.  This also works well for highly compensated key employees of larger corporations where the T4 income paid is well above $150,000 per year. This includes CEOs, CFOs, and COOs of large companies,” Laporte explains.

Laporte says he has long advocated for better pension coverage for everyone, particularly those who don’t have workplace pensions and may have to rely solely on funding their own retirement via RRSPs. He advocated 15 years ago for an expansion of the CPP, which he says is a step in the right direction. He says he got his idea for CPP expansion after learning about the goals of the Saskatchewan Pension Plan (SPP).

He says the goal of making retirement “fair for all Canadians” would be like an effort to “rise all boats” to a higher level.

We thank JP Laporte for taking the time to talk with Save with SPP.

The Saskatchewan Pension Plan is non-profit, low-cost defined contribution plan that can help you grow your retirement savings, and provides a variety of annuity options at retirement. Get in the know 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