Ontario Retirement Plan
Op Ed 6 February 2014
When I was elected in 2007, one of my goals was to bring a pension plan to Ontario. It was clear that the Canada Pension Plan, even with the Old Age Security plan, would not provide sufficient income for many seniors’ retirement years.
After a few years of research, consultation with pension experts and lots of hard work by our research staff, I was very proud when the Ontario NDP announced the Ontario Retirement Plan; the plan that would finally raise the standard of living for our seniors. And now the current government is talking about implementing an Ontario pension plan!
Although this sounds exciting, there’s election talk in the air and that’s the time to make grand announcements and not worry about outcomes, just the votes it could garner.
The NDP’s Ontario Retirement Plan (ORP), announced in 2011 would be a targeted benefit plan with only partial cost of living indexing guaranteed. That is, all of the benefit (monthly income) is guaranteed although there is some flexibility around the cost of living indexing. It’s very different than a defined contribution plan where your benefit on retirement simply reflects an individual’s investment returns and nothing is guaranteed.
Also, unlike a defined contribution plan, the assets of the plan are invested for the plan as a whole, not on an individual basis (it is a pooled fund) and the longevity risk is spread across all plan members so members can’t outlive benefits. Retirement benefit (monthly income) would be higher than under a Group RRSP or a Defined Contribution pension plan.
The ORP maximum basic benefit would be approximately $700/month in 2013 dollars.
You would automatically be put into the plan, but if you have a workplace pension you can opt out; it is completely portable to any employment in Ontario; it is about half the CPP contribution rate; and you can buy back time to increase your contributions to the plan, or if you opted out, transfer from an RRSP to buy-back that time. This “purchase of past service” credits relates to the monthly benefit, not an enhanced benefit entitlement.
Small plans would have the option of collapsing into the ORP by using plan assets to buy past service credits for members or some similar arrangement. This would allow for the consolidation of an excessively fragmented Ontario pension system with over 6,500 plans.
The ORP would be administered by a public entity, like OpTrust, OMERS, Teachers’ Pension Plan, OPSEU, HOOPP, or a consortia of existing public sector pension funds, all of which have excellent track records and work solely for the good of their plan members
Although this all sounds good for many of us, there are some who may not want this opportunity, so before we go forward with supporting any such plan, the NDP is consulting with Ontarians to be sure that our actions support the will of the people.
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