Nov 23: BEST FROM THE BLOGOSPHERE

November 23, 2023

SPP: a provincial plan that supplements CPP, rather than replacing it

Writing in the Edmonton Journal, Matthew Black notes that Alberta – interested in setting up its own provincial pension plan – can learn from plans other provinces have set up, or proposed.

The article looks at how Quebec, Ontario and Saskatchewan handled the idea.

In Quebec, the article notes, a decision was taken in 1965 not to join the then-new Canada Pension Plan (CPP), “instead establishing its own Quebec Pension Plan.”

Pension scholar Patrik Marier tells the Journal that Quebec’s decision to set up its own, new parallel plan on day one “is significantly easier than disentangling hundreds of billions of in assets from an existing plan, as Alberta would have to do.”

While Quebec argued in 1965, as Alberta argues today, that it has a younger population, things can change, Marier points out in the article.

“After the baby boom, there was a baby bust,” he tells the Journal. He notes that “Quebec’s fertility rate fell by half by the start of the 1970s following the Quiet Revolution,” and that contributions made by members of the Quebec plan are now higher than those made by members of the Canadian plan.

When Ontario unveiled plans, almost a decade ago, to roll out its own plan, the idea was for the Ontario Retirement Pension Plan to have “complemented, not replaced” the CPP, the article notes.

The plan was criticized by the then-Opposition provincial Progressive Conservatives as being a “job-killing payroll tax.” The federal government of the day also refused to cooperate with Ontario on the plan, the article notes.

“Ottawa’s refusal saddled Ontario with extra costs and administrative headaches, including collection of contributions, tax issues and integration with existing retirement savings programs,” the article explains.

The plan fizzled out, the article notes, after the Liberals won the federal election in 2015 and promised to expand the CPP.

In Saskatchewan, the article notes, the idea of creating the Saskatchewan Pension Plan (www.saskpension.com) was to “provide a voluntary provincial pension to supplement the CPP.”

“In the 1980s, Saskatchewan wanted to see homemakers, and others who lacked access to private plans, included in the CPP as part of a series of reforms led by the Mulroney Progressive Conservative government,” the article explains.

“The idea wasn’t popular among other provinces, but nonetheless became one of the founding principles of the Saskatchewan Pension Plan when it was created in 1986 without the complex negotiations involved with leaving the CPP,” the article reports.

“You could put in contributions which would actually provide some sort of a pension,” Marier tells the Journal, adding that “it would lessen the penalty of raising children at the time if you were leaving the labour market.”

“Over its lifetime, SPP claims to have an average return of 8.1 per cent to members, of which there are currently around 33,000,” the article concludes.

Why would supplementing the CPP – as SPP does, and as ORPP was intended to do – make sense? According to the federal government’s own figures, the average CPP payment for “new beneficiaries” at age 65 is $772.71. The maximum is $1306.57. Those figures are gross amounts (no tax factored in), so you can see that it is a modest benefit.

And while many Canadians also will get Old Age Security (OAS), the maximum amount, again according to the feds is “up to $707.68,” for those under age 75, with the possibility of a clawback of some or all of that for higher-income earners.

So, with a maximum benefit of $2,000 and change from both CPP and OAS, the need to supplement government benefits with other income – perhaps from a workplace pension or private savings – becomes clear. And that’s where the SPP comes in.

Any Canadian with registered retirement savings plan (RRSP) room can join SPP. The money you contribute is invested in a low-cost, professionally managed pooled fund. When it’s time to retire, you can collect some or all of your SPP retirement savings as a lifetime monthly annuity payment.

Great news! SPP’s flexible Variable Benefit option is no longer limited to those members living within the borders of Saskatchewan. Now all retiring SPP members across the country can take advantage of this provision, which puts you in control of how much income you want to withdraw, and when you want to withdraw it. You can also transfer in additional savings from other unlocked registered sources. For full details see SaskPension.com.

Check out SPP today!

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CPP, Edmonton Journal, OAS, SPP

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