Years ago, when we were working away at Lakehead Living in Thunder Bay, Ont., a colleague asked us if we were contributing to a registered retirement savings plan (RRSP).

“What’s that?” we asked. And once it was explained that you would get a tax refund for contributions made to an RRSP, the 25-year-old us was in – starting off at $25 per month.

What’s the best retirement savings tip out there? Save with SPP decided to have a look.

Start saving today, advises the Merrill division of Bank of America. “Start saving as much as you can now and let compound interest — the ability of your assets to generate earnings, which are reinvested to generate their own earnings — have an opportunity to work in your favour,” the bank advises.

At the InvestedWallet blog there are two tips of note – to “fund your retirement account with side hustles,” and to “ditch the lavish vacations.”

Using “side hustles,” such as “flipping furniture, using a 3D printer to make money, or completing freelance gigs” is a great way to boost savings – direct your profits there, rather than to buying furniture or taking trips, the blog advises. And on big annual trips, Invested Wallet suggests cutting back on “destination” vacations (the average vacation in the U.S. costs $1,145 per year) and instead, doing something affordable during time off and putting the saved cash into retirement.

The Forbes Advisor offers up a couple of good tips – get rid of your debt now, and not after you are retired, and “practice retirement spending now.” The first one needs no further explanation – debt is harder to pay off when you are living on less.

The “practice” tip is intriguing. Basically, the article suggests that most retirees will live on 80 per cent of what they were earning before retiring. We had a friend who was fearful about living with her first mortgage. So her husband said look, let’s bank the difference between our rent and the mortgage in the run-up to buying the house, and live on the reduced income. This idea worked, her fears were abated and by now we’re sure that house is paid for.

At Sun Life, a variety of tips are included, with a sound bit of advice being “take full advantage of your employee pension plan.” A lot of times, the company pension plan may be optional. You don’t have to join. But if you don’t, you are missing out on putting away money for retirement, often with an employer match.

If you are in a defined benefit pension plan, be sure to find out if there are ways to purchase service for periods of time when you were off on a maternity or parental leave. Your future you will thank you later.

We’ll add a few others we have gleaned over the years.

Make your saving automatic – contribute something towards your retirement every payday, and up it when you get a raise. You will be paying yourself first.

A nice place to put your Canada Revenue Agency tax refund is back into your SPP or RRSP account. You’re making the refund tax-deductible.

Start small. We started with $25 a month nearly 40 years ago. Don’t think you have to start off big, or you may never start off at all!

If you haven’t started saving yet, a wonderful resource to be aware of is the Saskatchewan Pension Plan. It’s open to any Canadian with RRSP room. With SPP, you can contribute any amount you want, up to $7,000 per year, and can transfer up to $10,000 a year from other RRSPs. SPP will pool your contributions, invest them at a low cost, and grow them into a future source of retirement income. Check out SPP today!

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Scott Terrio knows all about the issues facing senior retirees.  Terrio, who is Manager, Consumer Insolvency at Hoyes, Michalos Licensed Insolvency Trustees, recalls doing “a lot of speaking engagements for senior groups” about money and debt. He said “retired people, who have lived a long time, ask a lot of questions (about finances), and they are certainly not a retiring bunch.”

Save with SPP spoke recently with Terrio by phone.

He says that debt is a problem for retirement, “both at the front end and the back end.” Debt can certainly encroach upon the money people want to set aside for their retirement, he explains, but it is even a bigger problem for those who are actually retired.

“Life is expensive,” says Terrio. As interest rates declined, and people’s equity grew, retirees – most living on a fixed income — began taking on debt for the first time. Seniors, he explains, began tapping into their equity for “various things,” such as helping the kids and grandkids get ahead and buy homes. These days, many have tapped into credit to pay for day to day living, he says.

Today’s retired seniors began making use of their equity, but at the same time, began to live longer. “People are living much longer than ever before. Retirement can last for 30 years or more.”  That can be costly, Terrio says. “The cost of (long term care) will kill you financially,” he says. “Care is very expensive – thousands a month – and that adds up if you live into your 90s.”

Retirees typically get into trouble gradually, he says. A lot of newly retired seniors don’t realize that they will usually owe income tax unless they have their pensions and government benefits adjusted to withhold more tax. “They are used to being on payroll, where someone takes the tax off for you. That doesn’t happen when you’re retired, and you can find yourself in a hole.”

Owing the Canada Revenue Agency for unpaid taxes isn’t usually a huge debt, but if you don’t have money to pay it, it can be “the straw that breaks the camel’s back,” he explains.

It’s having to pay for things like taxes that starts seniors looking at credit, and debt, he notes.

Once you use up your credit card room, “the banks love giving lines of credit and higher credit card limits to seniors, who tend to have equity, and since nine of 10 of them tend to pay it back.”

That’s why the expected jump in interest rates is also concerning, Terrio says.

“When interest rates go up, they have a direct effect on lines of credit,” he says. “Even an increase of $100 a month in interest payments is bad news for a senior. Now they have to pay that every month. And since the real rate of inflation is probably six, seven or even eight per cent, everything you’re buying is now more expensive and you have less money to spend. That’s the main issue.”

Debt is not something people get into on purpose. “In any age category, very few get into debt intentionally. It’s a gradual creep, usually driven by events such as loss of a job, sickness, divorce. You can maybe absorb one of these things at a time, but two – no way.”

As well, older Canadians want to help their children and grandchildren save for education and housing. “We are seeing the greatest intergenerational wealth transfer of all time,” Terrio says. And that can use up savings and leave people with debt as their only option.

The problem with debt is that it no longer is seen as a bad thing, Terrio says.

Maybe, he says, older folks once saw debt as shameful, but it is “not a shame thing” for many Gen X, Gen Y or millennials. “The younger people get accustomed to it, they less they are bothered by it.”

The problem, he concludes, is that debt “is seen as cash flow as opposed to debt.” People need to remember that credit card and line of credit money “isn’t your money… it’s the bank’s money.”

We thank Scott Terrio, who many years ago worked in Swift Current for a major farm equipment company, for taking the time to speak with us. Did you know that the money in your Saskatchewan Pension Plan account is locked in until you reach retirement age, and is also creditor-proof? If you run into financial troubles on your way to retirement, your SPP nest egg will be unaffected. It’s another great feature of the SPP.

Join the Wealthcare Revolution – follow SPP on Facebook!

We got a chance to catch up recently with Sheryl Smolkin, the original Save with SPP writer who has had a long career as a pension lawyer, a magazine editor, and a freelance writer/blogger.

Speaking over the phone from her Toronto home, Sheryl explains that because she worked at a variety of jobs over her working years, her retirement income comes from a variety of different streams.

She was Canadian Director of Research and Information at a global consulting firm for 18 years. Later, she became editor of Employee Benefit News magazine for four years, and subsequently she turned her talents to freelance writing. Sheryl played a pivotal role in setting up the Saskatchewan Pension Plan’s (SPP) social media efforts, including the Save with SPP blog that she pioneered.

When she left consulting, she received a defined benefit pension and retiree health insurance, she explains. As a result, she and her husband have retirement income from an employment pension, government benefits, and other registered and un-registered savings, including SPP. They have been “drawing down” income from various streams since their mid-50s.

Sheryl says she regularly transferred $10,000 annually from her RRSP to SPP over the years. When she reached 71, she looked at her SPP options and decided on the prescribed registered retirement income fund (PRRIF) to draw down her savings. With that option, she will cash out the Canada Revenue Agency (CRA) required minimum amount from her account each year.

So, she says, while some folks (including this writer) might think that 71 is a sort of magic age when all retirement savings gets converted to retirement income, that’s probably not the case for many people.

“My recommendation is always this,” she explains. “Everybody worries about having enough money in retirement; but the real worry is, are you going to have enough time” to spend it. “Enjoy spending the money – there are very few people who actually run out of money.”

She’s been busy since she wrapped up her writing work for SPP back in 2018. In the pre-COVID era, she took courses at Ryerson University, took care of her aging mom who passed away in 2019, visited the kids and her granddaughter in Ottawa, and went to every sort of live theatre, music performance or other show on offer. “We were having a lot of fun before COVID,” she says, and that will resume now that the pandemic appears to be winding down.

Her husband, a “serial hobbyist,” has not slowed down on his woodworking during the pandemic. She has taken advantage of the quiet period to catch up on her reading.

Sheryl does not hanker for a return to the workforce. When she left her consulting position in 2005, she notes, “I was NOT ready for retirement, but by 2018, it was time.”

She says however, that occasionally she does “miss the satisfaction of producing a piece of work, and seeing it online or in print – creating.” With her job at the magazine, there were a lot of conferences and travel, which she liked – but recalls that at one conference, she also agreed to produce a daily newspaper which was particularly hectic.

Fun is a central theme in talking to Sheryl. She says it is very important to have fun in your retired life. “Everyone has something they want to do, but the beauty of it (retirement) is that you don’t HAVE to do anything, if you don’t want to,” she says.

These days, she is anticipating getting involved “in the rhythm of the year” again through visits with friends and family. She looks forward to resuming “long distance travel” again once things are safe. Until then, “I’m excited to be able to go back to Stratford, back to the Shaw Festival, and other Canadian destinations.”

Sheryl says retirement really consists of three phases – the early stage, the mid-stage, and the later stage.

“Don’t be afraid to spend money in the earlier, more active stage of retirement,” she advised. “There will be less travel and shopping as you get older.”

She is glad that the SPP has provided one of her retirement income streams. “I think it’s a very good program,” she says. “For us, SPP is part of a bigger overall plan, which has both registered and unregistered components.”

So retirement income is a river fed by multiple income streams – we thank Sheryl for that lovely, and very evocative image. She says hi to everyone at SPP in Kindersley, and we all thank her very much for her time and wish her continued happiness in her life after work.

Need to add a good stream to your future retirement river? Consider joining the SPP. It can augment the income you’ll receive from workplace and government plans, and the best part is that you can now contribute up to $6,600 a year – and can transfer in up to $10,000 a year from other RRSPs. Be sure to check out SPP today!

Join the Wealthcare Revolution – follow SPP on Facebook!

It’s abundantly clear to most of us that Canadians aren’t able to save much money for the long-term, given the high costs of housing, historic levels of household debt, the lack of workplace retirement savings programs, and many other factors. A new research paper, The Canada Saver’s Credit, suggests a solution. 

Supported through the coalition behind the Common Good Retirement Initiative and published jointly by Common Wealth and Maytree, the paper’s authors Jonathan Weisstub, Alex Mazer and André Côté ask: Why not have the government match dollars contributed to a TFSA by qualifying moderate and low-income earners?  Save with SPP talked about the research with one of the study’s authors, André Côté.

The Canada Saver’s Credit (CSC) concept is fairly simple, he explains. Those whose income qualified them for the program would receive a dollar-for-dollar match by the federal government for every dollar they contributed to a TFSA, with the maximum match of $1,000.

“We wanted it to be as simple as possible for the consumer,” Côté explains. “Processing would be done by the Canada Revenue Agency (CRA). The definition is that if you are eligible for things like the GIS or the GST/HST credit, you similarly would be eligible for this; CRA would determine eligibility when you file your taxes.”

The government would provide the match (up to $1,000) based on the TFSA contributions the tax filer made in that tax year, and the money would appear in your account. Côté agrees that it would be similar to how the government matches, in part, contributions made to a Registered Education Savings Plan.

In drafting the report, Côté says recent research by Richard Shillington found that the average Canadian in the 55 to 64 age range had just $3,000 in retirement savings.

“It’s a stunningly low level of preparedness,” he says. As for causes, he says it is “particularly hard to save for modest to lower incomes, there are certainly… changes in pension coverage, people tend not to have retirement plans (at work), and the private retirement savings model isn’t well oriented toward moderate and lower income people.”

In designing CSC, Côté and his co-authors considered whether or not to make the program locked-in, meaning funds can only be accessed for retirement. But in the end, the “open” nature of the TFSA was preferred, he explains.

“The question is if you encourage longer-term savings … is locked-in any better? There is a paternalistic aspect to the policy that puts constraints around peoples’ money; a non-locked in TFSA offers liquidity and flexibility,” explains Côté. The CSC, he says, will offer a way to save for the long term that also can be accessed if there’s a hole in the roof or other financial crisis along the way.

These days, he notes, there is “asset poverty” among Canadians, meaning basically that many people owe more than they own, and thus lack long-term savings for emergencies. Research shows that many Canadians are “unbanked,” a term that refers to their total lack of savings. CSC can address both problems, he explains.

The authors based their proposal in part on the US Saver’s Credit, introduced in the early 2000s. The program offered a compelling model, but “never reached maximum effectiveness,” he says, because the core savings components the US policy-makers wanted were “removed or watered down.”

The paper was also heavily informed by the work of a number of leading Canadian experts in retirement savings and income security, including John Stapleton and Richard Shillington who first advocated for a TFSA matching model a decade ago.

While the authors of course take full responsibility for their work, Côté notes that the Canada Saver’s Credit proposal benefitted immensely from the amazing group of expert reviewers from Canada and the United States.

We thank Andre Côté for taking the time to talk with SPP.

Retirement saving can be difficult and daunting. The Saskatchewan Pension Plan is a useful tool for your own savings efforts, you can start small and ramp up your efforts over time. At the end, SPP offers an easy way to automatically turn your 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 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 you are anticipating a large tax return you may have filed your income tax return as early as possible once you received all of your tax slips. The deadline for filing is April 30, 2018, but for Canadians who ran a business, or whose spouses ran a business, during the 2017 fiscal year, the tax deadline is pushed out to June 15.

However, for those of you who are still wading through the piles of paper on your desk to assemble the documentation you need to complete your 2017 income tax return, we present Part 2: Tax deductions, credits you need to know about. You can find Part 1 here.

1. 1. Line 212 – Annual union, professional dues: Claim the total of the following amounts related to your employment that you paid (or that were paid for you and reported as income) in the year:
      • Annual dues for membership in a trade union or an association of public servants.
      • Professional board dues required under provincial or territorial law.
      • Professional or malpractice liability insurance premiums or professional membership dues required to keep a professional status recognized by law.
      • Parity or advisory committee (or similar body) dues required under provincial or territorial law.
   2. Line 214 – Child care expenses: Canadian taxpayers can claim up to $8,000 per child for children under the age of 7 years at the end of the year, and $5,000 per child for children aged 7 to 16 years. For disabled, dependent children of any age who qualify for the disability tax credit, the amount to claim for that child is $11,000. More details about what expenses qualify, who can claim expenses and for whom expenses may be claimed can be found here.
   3. Line 219 – Moving expenses: To qualify, your new home must be at least 40 kilometres (by the shortest usual public route) closer to your new work or school. You can claim eligible moving expenses if you moved:
      • And established a new home to work or run a business at a new location; or
      • To be a student in full-time attendance in a post-secondary program at a university, college or other educational institution.
   4. Line 229 – Other employment expenses: Most employees cannot claim employment expenses. You cannot deduct the cost of travel to and from work, or other expenses, such as most tools and clothing. However, you can deduct certain expenses (including any GST/HST) you paid to earn employment income.You can do this only if your employment contract required you to pay the expenses and you did not receive an allowance for them, or the allowance you received is included in your income.If you are filing electronically, keep all your documents in case CRA asks to see them at a later date. If you are filing a paper return, you must submit a completed Form T777, Statement of Employment Expenses with your return. Keep all your other documents in case CRA asks to see them at a later date, including a completed copy of Form T2200, Declaration of Conditions of Employment signed by your employer.
   5. Lines 230 and 220 – Support payments made: If you are claiming deductible support payments, enter on line 230 of your tax return the total amount of support payments you paid under a court order or written agreement. This includes any non-deductible child support payments you made. Do not include amounts you paid that are more than the amounts specified in the order or agreement, such as pocket money or gifts that you sent directly to your children.
   6. Line 313 – Adoption expenses: As a parent, you can claim an amount for eligible adoption expenses related to the adoption of a child who is under 18 years of age. The maximum claim for each child is $15,670. You can only claim these incurred expenses in the tax year including the end of the adoption period for the child.
   7. Line 319 – Interest paid on your student loans: You may be eligible to claim an amount for the interest paid on your loan in 2017 or the preceding five years for post-secondary education if you received it under:
      • The Canada Student Loans Act.
      • The Canada Student Financial Assistance Act.
      • The Apprentice Loans Act.
      • Similar provincial or territorial government laws.

      Only you can claim an amount for the interest you, or a person related to you, paid on that loan in 2017 or the preceding five years.

      You can claim an amount only for interest you have not already claimed. If you have no tax payable for the year the interest is paid, it is to your advantage not to claim it on your return. You can carry the interest forward and apply it on your return for any of the next five years.

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Written by Sheryl Smolkin
	Sheryl Smolkin LLB., LLM is a retired pension lawyer and President of Sheryl Smolkin & Associates Ltd. For over a decade, she has enjoyed a successful encore career as a freelance writer specializing in retirement, employee benefits and workplace issues. Sheryl and her husband Joel are empty-nesters, residing in Toronto with their cockapoo Rufus.

When you are interviewing for a new a new job, perks like company-paid gym memberships, tuition reimbursement or a free cellphone may seem really attractive and influence you to accept the position. However, it is important to keep in mind that come tax time, all or part of the value of these employee benefits may be included in taxable income on your T4 slip.

Here are 10 things that may form part of your compensation and how they are viewed by CRA.

1. Group benefits: Amounts your employer pays for your life, accident and critical illness insurance coverage are taxable benefits. But when the company pays all or part of the cost of your extended health care, dental plan, short-term disability (STD) or long-term disability (LTD) insurance you do generally not pay tax on the premiums. If you collect on your STD or LTD insurance you will pay taxes if any part of the premiums were employer-paid.
2. Pensions/Group RRSPs: Your company’s contributions to your pension plan are not taxable. However, your employer’s contributions to your Group RRSP account are viewed as additional taxable income by CRA. But you can deduct RRSP contributions (up to $26,010 for 2017) so you will not actually have to pay taxes on Group RRSP contributions made by your employer on your behalf.
3. Service and recognition awards: Cash, gift certificates and things like gifts of stock certificates and gold coins are always taxable benefits. However, you can receive tangible tax-free gifts or awards worth up to $500 annually in some specified circumstances, such as a wedding or outstanding service award. In addition, once every five years you can receive a tax-free, non-cash long-service or anniversary award worth $500 or less
4. Clubs and Recreational Facilities – If your employer pays or subsidizes the cost of membership or attendance at a recreational facility such as a gym, pool, golf course, etc. it is considered a taxable benefit. But if the company provides a free or subsidized onsite facility available to all employees, it is not a taxable benefit.
5. Tuition reimbursement: If you get a scholarship or bursary from your employer it will be a taxable benefit unless you took the program to maintain or upgrade your employment skills. For example, if you need an executive MBA to be promoted, no tax is payable on the value of company-paid tuition. Where the company gives your child a scholarship or bursary, generally neither you nor your son or daughter who gets the scholarship has to pay taxes on the amount.
6. Transit Passes: Transit passes are a taxable benefit unless the employee works in a transit-related business (such as a bus, train, or ferry service business).
7. Child Care Expenses are a taxable benefit unless child care is provided to all employees in the business at little or no cost.
8. Mobile phone or internet: Charges paid by the company for the business use of your cellphone and internet are not taxable. If your phone or internet is used in part for personal reasons, that portion of the bill should be reported on your T4 as a taxable benefit. However, if the cost of the basic plan has a reasonable fixed cost and your use does not result in charges over the cost of basic service, CRA will not consider any part of the use taxable.
9. Subsidized meals: If the company cafeteria sells subsidized meals to employees, this will not be considered a taxable benefit as long as employees pay a reasonable amount that covers the cost of food preparation and service.
10. Discounts on merchandise: Generally, if your employer sells merchandise to you at a discount, the benefit you get is not considered taxable. A document posted on the CRA website in late 2017 suggested that CRA’s interpretation changed, but National Revenue Minister Diane Lebouthillier subsequently announced there have been no changes to the laws governing taxable benefits to retail employees.

This chart illustrates whether taxable allowances and benefits are subject to CPP and EI withholdings. The employer’s Guide: Taxable Benefits and Allowances, including What’s New? Can be found here.

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Written by Sheryl Smolkin
	Sheryl Smolkin LLB., LLM is a retired pension lawyer and President of Sheryl Smolkin & Associates Ltd. For over a decade, she has enjoyed a successful encore career as a freelance writer specializing in retirement, employee benefits and workplace issues. Sheryl and her husband Joel are empty-nesters, residing in Toronto with their cockapoo Rufus.

When you file your income tax return you want to make sure you have all the receipts and income records you need to make sure you get every tax receipt and deduction you are entitled to.

By the end of February T4 (income from employment), T4A (pension and other income) and T5 (statement of investment income) slips you require to complete and file your income tax return must be in the mail. However, unlike most other tax slips, Canadian T3 tax slips, or Statement of Trust Income Allocations and Designations (income from mutual funds in non-registered accounts) and T5013 slips (Statement of Partnership Income) do not have to be sent out until the last day of March in the year after the calendar year to which these tax slips apply.

So even if you are anxious to get your income tax return off your desk and see your tax return deposited to your account, wait an extra week or two to ensure you have all the slips you need before filing or you may have to pay additional taxes later on when your tax return is assessed or re-assessed. Many financial institutions provide a check list so you can check off slips as you receive them.

However, if you have to file a return for 2017, file it on or before April 30, 2018 even if some slips or receipts are missing. You are responsible for reporting your income from all sources to avoid possible interest and/or penalties that may be charged.

If you have not received, or have lost or misplaced a slip for 2017 ask your employer, or the issuer of the slip, for a copy. If you know you will not be able to get a slip on time to file your return, or you do not receive it and you are registered for the CRA My Account for Individuals service, you may be able to view your tax information online. Otherwise, attach a note to your paper return stating the payer’s name and address, the type of income involved, and what you are doing to get the slip.

Use your pay stubs or statements to estimate the income to report and any related deductions and credits you can claim. Attach a copy of the pay stubs or statements to your paper return and keep the original documents. If you are filing electronically, keep all of your documents in case CRA asks to see them later.

You can also obtain Old Age Security (OAS), Employment Insurance (EI) and Canada Pension Plan (CPP) tax slips electronically for current and prior years. This secure service can be accessed found by visiting Service Canada.

Certain slips such as T2202As for tuition deductions, T5008s for capital gains and losses and RRSP contributions are not always processed by the CRA. While the rules differ across the various types of tax forms, some slips can be generated independently and don’t have to go through the CRA’s system first.

In that case you will have to track them down from the source provider since the CRA won’t have them on file. For example, if you know you’re meant to receive a tuition credit, call the school to request your form. If you’ve made some stock trades in the year, call your bank to obtain a gains and losses report.  Unfortunately there’s no fool-proof way to know that you’ve got all these types of slips – you’ll just need to remember!

If you missed a significant slip that the CRA does not have on file such as a tuition slip, you can file an adjustment to your return down the road if you’re able to track it down. Before you file your return, double checking that you’ve got all your slips covered will mean a faster refund, no interest and less stress.

You can find a checklist of other slips, receipts and documentation you may require to file your return here.

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Do you follow blogs with terrific ideas for saving money that haven’t been mentioned in our weekly “Best from the blogosphere?” Share the information on http://wp.me/P1YR2T-JR and your name will be entered in a quarterly draw for a gift card.

Written by Sheryl Smolkin
	Sheryl Smolkin LLB., LLM is a retired pension lawyer and President of Sheryl Smolkin & Associates Ltd. For over a decade, she has enjoyed a successful encore career as a freelance writer specializing in retirement, employee benefits and workplace issues. Sheryl and her husband Joel are empty-nesters, residing in Toronto with their cockapoo Rufus.

 

Today, I’m very pleased to be talking to Katherine Strutt, general manager of the Saskatchewan Pension Plan. She has some exciting news to share with us about enhancements to the program, including an increase to the SPP maximum annual contribution level effective immediately for the 2017 tax year.

SPP is the only plan of its kind in Canada — a retirement savings plan, which does not require an employee/employer relationship. As a result, it can be of particular benefit to individuals with little or no access to a pension plan.

Welcome, Katherine.

Thank you, Sheryl.

Q: For the last seven years the maximum annual contribution SPP members with RRSP contribution room could make was $2,500. How has that changed?
A: As you indicated, the maximum annual contribution limit was increased to $6,000 effective January 29, 2018, and it can be used for the 2017 tax year. However, members must still have available RRSP room in order to contribute the full $6,000 but the limit is now indexed as well, starting in 2019.

Q: If a member contributes $6,000 until age 65 how much will his or her pension be?
A: We estimated that someone contributing for 25 years and retiring at age 65 can end up with a pension of about $2,446 a monthbased on an 8% return over the period. However, we encourage people to use the wealth calculator on our website because they can insert their own assumptions. And if they want a more detailed estimate they can call our office.

Q: Can a spouse contribute for his or her partner if that person doesn’t have earned income and how much can the contribution be?
A: The SPP is a unique pension plan in that spousal contributions are acceptable. So, for instance, my spouse has to be a member. But I can contribute to his account and my account up to $6,000 each if I have the available RRSP room. If I’m making a spousal contribution, the money goes into his account, but I get the tax receipt. Other pension plans don’t offer that option. You could have a spousal RRSP, but with SPP you can actually have a spousal pension plan.

Q: Oh, that’s really fantastic. So actually, in effect, in a one-income family, the wage earner would get $12,000 contribution room for the year.
A: Yes, as long as they have available RRSP room, that’s for sure.

Q: That’s a really neat feature. And to confirm, members can contribute the full $6,000 for the 2017 tax year?
A: Yes, they can. Because we’re in the stub period right now, any contribution made between now and March 1st can qualify for the 2017 tax year.

Q: Have you had any feedback on the increased contribution level? If members are just finding out about the increase now, how much of an uptake do you expect given that, you know, maybe they haven’t saved the money or they haven’t allowed for it?

A: We’ve already had some members that have done it. I can’t tell you how many, but I was checking some deposits yesterday, and I saw that some people have already topped up their contributions. We anticipate that people who contribute on a monthly basis will start increasing their monthly contributions because they have an opportunity to do so. But it will be really hard to know until after March 1st how many people actually topped up their 2017 contributions.

The response has been very, very positive from members. They have wanted this for a long time. The new indexing feature is also very attractive as the $6,000 contribution will increase along with changes to the YMPE (yearly maximum pensionable earnings) every year.

Q: How much can a member transfer into the plan from another RRSP? Has that amount changed?
A: No, that amount has not changed. That remains at $10,000. But the board is continuing to lobby to get that limit raised.

Q: Another change announced at the same time is that work is beginning immediately on a variable pension option at retirement. Can you explain to me what that means and why it will be attractive to many members?
A: We have a lot of members who want to stay with us when they retire, but they’re not particularly interested in an annuity because annuity rates are low, and they do not want to lock their money in. They prefer a variable benefit type of option, but until now their only way of getting one has been to transfer their balance out of the SPP to another financial institution.

The new variable benefit payable directly out of our fund will be similar to  prescribed registered retirement income funds, to which people currently can transfer their account balances.

It will provide members with flexibility and control over when and how much retirement income to withdraw, and investment earnings will continue to grow on a tax-sheltered basis. Those members who want to stay and get the benefit of the low MER and the good, solid returns I think will be attracted to this new option.

Some members may wish to annuitize a portion of their account and retain the balance as a variable benefit. This will ensure they have some fixed income, but also the flexibility to withdraw additional amounts for a major expense like a trip, for instance.

Q: Now, what’s the difference between contributing to an RRSP and SPP?
A: In some respects, they’re very similar in that contributions to the SPP are part of your total RRSP contribution limit. One of the biggest advantages I think that SPP has is it is a pure pension plan. It’s not a temporary savings account. It’s meant to provide you income in your retirement.

All of the funds of the members, are pooled for investment purposes, and you get access to top money managers no matter what your account balance is or how much you contribute. Typically those services are only available to higher net worth individuals, but members of SPP get that opportunity regardless of their income level.

And the low MER (management expense ratio) that in 2017 was 83 basis points, or 0.83 is a significant feature of SPP. Solid returns, and the pure pension plan, I think those are things that make us different from an RRSP. We are like a company pension plan, if you are lucky enough to have access to a company pension plan. That’s what we provide to people regardless of whether or not their employer is involved.

Q: If a member still has RRSP contribution room after maxing out SPP contributions, can he or she make additional RRSP contributions in the same year?
A: You bet. Your limit is what CRA gives you, and how you invest that is up to you. So for instance, people that are part of a pension plan might have some additional available RRSP room left over. They can also then contribute to the SPP and get a benefit from their own personal account, in addition to what they are getting from their workplace pension.

Q: MySPP also went live in late January. Can you tell me some of the features of MySPP, and what member reaction has been to gaining online access to SPP data?
A: The reaction from members has been very positive. They’ve been asking for this for a while, and we did a bit of a soft roll out the end of January with a great response. Then members are going to be getting information with their statements, and we expect an even bigger uptake.

Once they’ve set up an account, they can go in and see the personal information we have on file for them, who they’ve named as their beneficiary, when the last time was that they made a contribution and what their account balance is. Furthermore, if they’ve misplaced a tax receipt or can’t find their statement, they can see those things online.

Retired members can get T4A information and see when their pension payments went into their accounts. So it’s a first step, and we think it’s a really positive one, and we’re getting some really good feedback from our members.

Q: Finally, to summarize in your own words, why do you think the annual increase in the SPP contribution level, introduction of a variable benefit and MySPP makes Saskatchewan Pension Plan a better pension plan than ever for Canadians aged 18 to 71?
A: Well, I think that by having an increased contribution limit that is indexed, the program might be more relevant to people. It certainly will be a bonus I think to employers who wanted to match their employee contributions but were running up against the old limit. This will give them more opportunity to do so.

It will also improve the sustainability of SPP over the long term as people are investing more. The variable benefit we’ve introduced will give retiring members more options, and it will allow them to keep going with this tried and true organization well into their retirement.

MySPP  allows members access to their account information whenever they wish, 24/7 on all their devices. That will be attractive to younger prospective members.

Exciting times. Thank you, Katherine. It’s been a pleasure to chat with you again.

Thanks so much, Sheryl.

*This is an edited transcript of an interview recorded 1/31/2018.

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Written by Sheryl Smolkin
	Sheryl Smolkin LLB., LLM is a retired pension lawyer and President of Sheryl Smolkin & Associates Ltd. For over a decade, she has enjoyed a successful encore career as a freelance writer specializing in retirement, employee benefits and workplace issues. Sheryl and her husband Joel are empty-nesters, residing in Toronto with their cockapoo Rufus.

We have previously blogged about Why you should join SPP and 10 things you need to know about SPP. But joining a pension plan is a serious decision so before you make a commitment, you need answers to as many questions as possible.

Therefore this week we present a series of SPP FAQs (frequently asked questions) that will clarify a number of nuances about the program you may not yet be aware of.

Q: What is the difference between SPP and an RRSP?
A: SPP follows the same income tax rules as an RRSP except that SPP is locked in. Under tax rules contributions to SPP can be used as repayments to the Home Buyers Plan (HBP) and the Lifelong Learning Plan (LLP). However withdrawals are not permitted for this purpose.

Q: How much money can I contribute each year?
A: SPP regulations limit contributions to $6,000/year. Even though the SPP limit is $6,000, there is the potential to have tax receipts totaling greater than $12,000 for a tax year. For example, if you make two $6,000 contributions in the first 60 days of the year, one for 2017 and one for 2018, you will receive tax receipts totaling $12,000 to report on your 2017 tax return.

Q: How do I allow my tax program to accept more than $6,000 in SPP contributions?
A: All tax receipts received for the remainder of 2017 and first 60 days of 2018 must be entered for the 2017 tax year. Some tax programs will not allow more than $6,000 of Saskatchewan Pension Plan (SPP) contributions to be claimed even though members are eligible to claim the full amount made.

Therefore, it is important to always review your income tax return before filing, specifically line 208 of the T1 General, to ensure the full deduction expected is being made. If the full deduction required is not shown on line 208 you will need to make sure that you record your SPP contribution tax receipts the same way you would record a regular RRSP contribution tax receipt. In most programs this means you need to designate your SPP contribution as an RRSP; in other words, do not indicate you have made an SPP contribution.

Q: How much can I transfer in from another registered plan?
A: You can transfer up to $10,000 in cash per calendar year into your SPP account from existing RRSPs, RRIFs and unlocked RPPs. Funds transferred to SPP are subject to all SPP rules including the locking in provision. This means your transferred funds become part of your SPP account and can only be accessed when you choose a retirement option. Since these are direct transfers between plans, there are no tax implications.

Q: How can I convert my SPP savings into retirement income?
A: If having a stable income for the rest of your life is important to you then an annuity from SPP may be an appropriate choice. If maintaining control of investment decisions is important, then a Prescribed Registered Retirement Income Fund (PRRIF) or a Locked-in Retirement Account with another financial institution could be an appropriate alternative for you.

You also have the option to choose a combination of the annuity and PRRIF option.  At retirement time, if you have a pension benefit of $23.29 or less per month, 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.

Q: Who will invest my money?
A: SPP has independent, professional money managers. The funds are invested in a diversified portfolio of high quality investments to ensure a competitive rate of return. Your investments are monitored regularly. Leith Wheeler Investment Counsel Inc. and Greystone Managed Investments Inc. are the Plan investment managers.

Further FAQs can be found here.  Additional information is available from the SPP website  or by contacting SPP at in**@sa*********.com, 1-306-463-5410 (call collect) or 1-800-667-7153 (out of province, in Canada).

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Written by Sheryl Smolkin
	Sheryl Smolkin LLB., LLM is a retired pension lawyer and President of Sheryl Smolkin & Associates Ltd. For over a decade, she has enjoyed a successful encore career as a freelance writer specializing in retirement, employee benefits and workplace issues. Sheryl and her husband Joel are empty-nesters, residing in Toronto with their cockapoo Rufus.

Health Canada statistics reveal the number of Canadians with prescriptions for medical marijuana more than tripled between the fall of 2015 and 2016 from 30,537 people to nearly 100,000 individuals. And with legalized marijuana for recreational use slated to come into effect July 1, 2018, it is expected that use of the drug will soar.

In response to the proliferation of legal marijuana use, life and health insurance companies have had to rethink several aspects of their pricing and coverage including whether or not:

• Individual life insurance applicants using marijuana must pay smokers’ rates
• Benefit plans will reimburse clients for the cost of medical marijuana.

Smoker/Non-smoker rates
Until the last several years, marijuana users applying for individual life insurance had to pay smokers’ rates. For example, a man in his 30s could expect to pay about two to three times as much for a policy than a non-smoker. A smoker in his 40s could expect to pay three to four times as much.

Insurance companies charged this massive price increase because smokers have a much higher risk of death than non-smokers. In addition, smokers often have other health problems like poor diets or an inactive lifestyles.

Within the last two years, the following insurers in Canada announced their plans to begin underwriting medical and recreational marijuana users as non-smokers, including:

• Sun Life
• BMO Life Insurance
• Canada Life
• London Life
• Great-West Life

Sun Life is taking the most comprehensive approach, saying it will treat anyone who consumes marijuana but doesn’t smoke tobacco as a non-smoker. BMO Life Insurance is more restrained, limiting non-smoker status to people using only two marijuana cigarettes per week. Canada Life, London Life, and Great-West Life issued a joint statement which said that “clients who use marijuana will no longer be considered smokers, unless they use tobacco, e-cigarettes or nicotine products.”

This change won’t affect group benefits as coverage is not individually underwritten. An article on Advisor.ca includes a chart comparing where a series of major Canadian life insurers stand on pot use.

Drug plan coverage
So, what about coverage for medical marijuana under your benefits plan?

If your coverage includes a health care spending account (HCSA), you are in luck. Medical marijuana is an eligible expense under HCSAs because the Canada Revenue Agency (CRA) allows it to be claimed as a medical expense on income tax returns. Note that only marijuana is eligible under CRA medical exempt items, not vaporizers or other items used to consume it.

However, even though physicians are prescribing cannabis and people are using it for medical reasons, it is not currently covered under almost all traditional drug benefits. That’s because Health Canada hasn’t reviewed it for safety and effectiveness or approved it for therapeutic use the way it reviews and approves all other prescription drug products.

This means marijuana hasn’t been assigned a drug identification number (DIN), which the insurance industry usually requires before a drug can be covered. Until there is research that can be reviewed by Health Canada, marijuana will remain an unapproved drug and unlikely to be covered by your plan.

However several recent events suggest that it may be only a matter of time until group and individual drug plans offer at least limited coverage for medicinal marijuana.

Jonathan Zaid, a student at the Umiversity of Waterloo is the executive director of the group Canadians for Fair Access to Medical Marijuana. He has a rare neurological condition that causes constant headaches, along with sleep and concentration problems. Zaid said he was sick for five years before even considering medical cannabis. He tried 48 prescription medications, along with multiple therapies, all of which were covered by his insurer without question – except for medical cannabis.

After eight months of discussions, the student union (who administers the student health plan) came to the conclusion that they should cover it because it supports his academics and should be treated like a medication.

Similarly, the Nova Scotia Human Rights Board ruled in early 2017 that Gordon Skinner’s employee insurance plan must cover him for the medical marijuana he takes for chronic pain following an on-the-job motor vehicle accident. Inquiry board chair Benjamin Perryman concluded that since medical marijuana requires a prescription by law, it doesn’t fall within the exclusions of Skinner’s insurance plan.

Perryman said the Canadian Elevator Industry Welfare Trust Plan contravened the province’s Human Rights Act, and must cover his medical marijuana expenses “up to and including the full amount of his most recent prescription.”

And at least one major company is covering employees for medical marijuana in very specific circumstances. In March 2017, Loblaw Companies Limited and Shoppers Drug Mart announced in an internal staff memo that effective immediately it will be covering medical pot under the employee benefit plan up to a maximum of $1,500 per year for about 45,000 employees.

Claims to insurance provider Manulife “will be considered only for prescriptions to treat spasticity and neuropathic pain associated with multiple sclerosis and nausea and vomiting in chemotherapy for cancer patients,” said Basil Rowe, senior vice-president of human resources at Loblaw Companies Ltd., owner of Shoppers, in the memo.

“These are the conditions where the most compelling clinical evidence and literature supports the use of medical marijuana in therapy,” explained Loblaw/Shoppers spokesperson Tammy Smitham. “We will continue to review evidence as it becomes available for other indications (conditions).”

Since cannabis does not yet have a Drug Identification Number recognized by insurers, it isn’t covered under typical drug spending. However, it will be covered through a special authorization process where plan members will pay and submit their claim after, said Smitham.

The move could trickle down to other Canadian employers and their benefit plans and even set a precedent, Paul Grootendorst, an expert on insurance and reimbursement and director of the division of social and administrative pharmacy in the Leslie Dan Faculty of Pharmacy at the University of Toronto told the Toronto Star.

Written by Sheryl Smolkin
	Sheryl Smolkin LLB., LLM is a retired pension lawyer and President of Sheryl Smolkin & Associates Ltd. For over a decade, she has enjoyed a successful encore career as a freelance writer specializing in retirement, employee benefits and workplace issues. Sheryl and her husband Joel are empty-nesters, residing in Toronto with their cockapoo Rufus.