Talking to Katherine Strutt
January 5, 2012
Interview Transcript
My name is Sheryl Smolkin. I am a pension and benefits lawyer and journalist. Today I’m kicking off our series of interviews with the people behind the scene at the Saskatchewan Pension Plan. I’m talking to Katherine Strutt, the General Manager of the Plan.
Welcome Katherine. Thanks Sheryl.
Q. Who can join the SPP?
A. Anyone between the ages of 18 and 71 can join the plan no matter where they live or work. So while most of our members are from Saskatchewan, anybody from the rest of Canada can also join and be part of the plan.
Q. Why do Canadians need a pension plan? Most of us are eligible for CPP and OAS, plus anyone with a house effectively has a chunk of savings.
A. Well, if you think of retirement savings in Canada as a three-legged stool, on the first leg you have Old Age Security which is a universal program. On the second leg you have the Canada Pension Plan which is a workplace-based pension. And those two are the foundation for most people’s retirement savings. The third leg is individual retirement savings and that’s where the SPP fits in.
So it’s important to have some personal savings and the SPP provides a vehicle which is easy to use and gives members a strong return at a very low cost. Your home is a very important part of your personal savings but you cannot necessarily rely on that as your main source of funds for retirement.
Q. With an alphabet of savings options, why do you think Saskatchewan residents and other Canadians should consider the SPP as part of their retirement savings strategy?
A. Well as I said, the SPP is simple and easy. We provide members with a true pension plan. That’s the difference between us and a Group RRSP. And you can’t get that anywhere else on a personal basis. Members get access to a large institutional plan for a fee of about one percent or less.
This would compare very favourably to retail mutual funds which typically would charge anywhere from 2% to 3%.
Q. How much can each member contribute?
A. Each member can contribute up to $2,500 per year based on their own individual RRSP limits. They can transfer in another $10,000 each year from an RRSP, a RRIF or an unlocked pension plan.
Q. How does an individual know where to put his money first – pay off debt? SPP? RRSP? TFSA? It’s a challenge to figure all of these out.
A. It sure is, and it is certainly a very individual decision, but I believe it isn’t an either/or proposition. People can be paying down their debt the same time as saving for their retirement through the SPP. As their financial situation improves, they can increase their contributions to the SPP.
Q. What if a plan member can’t afford to make contributions because of unexpected other expenses?
A. That’s where the SPP is so flexible. If people need to stop making contributions for a while and then start up again, they can do so without penalty. It’s very flexible and very easy to use.
Katherine, thanks so much for taking the time to talk to me today. I know both members and prospective members will be very interested in your answers to my questions.
Katherine Strutt Interview, December 2010
Katherine Strutt podcast, December 10, 2010
Save for retirement, Save Often, Talk with SPP
What are the limitations and/or restrictions of the SPP in comparison to an individual RRSP?
Thanks for your question Troy. In a nutshell, the response to your question is “If you have RRSP room, you have room for SPP”. Plan participants can contribute up to $2500 each year, subject to their available RRSP room. SPP is a real pension plan which means funds are locked-in until age 55 at which time the account can be converted to retirement income. This conversion can be delayed until age 71 so that your account can keep growing. SPP members get the benefit of professional investment management for a low cost. SPP’s not-for-profit approach means that the Plan returns all of its earnings, less administration costs, to members.
Thank you for your quick response.
So then then aside from the contribution limit being much lower than my RRSP deduction limit, it sounds like the main downside to the SPP is that my funds are restricted until I’m 55.
At 55 am I able to pull all of my funds and do what I want with them? …Or must I convert to a retirement income fund directed by the SPP managers as well?
Thanks again for your question Troy.
A key difference between SPP and RRSPs is that SPP is a pension plan and as such is designed to provide lifetime income in retirement versus being a simple savings account. That’s why it’s locked in. When you elect to retire from SPP, any time after the age of 55, you will be able to receive annuity payments from SPP or transfer funds into a LIRA or pRRIF with another financial institution.
Watch for our January 19 blog which will contain a series of FAQ’s about pension payments.
To clarify, the fixed monthly payments are not indexed to inflation each year?
Thanks for your question Kathleen.
Annuity payments are a fixed dollar amount determined at the time of a member’s retirement from SPP. The member’s pension amount will never change; payments are not indexed.