New Ontario Pension

Preparing for life after work. RRSPs, RRIFs, TFSAs, annuities and meeting future financial and psychological needs.
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NormR
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New Ontario Pension

Post by NormR »

Looks like Mitzie Hunter will be in charge of setting up the made-in-Ontario pension plan.

Her website bio ...
Mitzie Hunter understands our community and the power of working together. A lifelong citybuilder, she is passionate about unlocking the city’s potential by ensuring fair and inclusive access to employment and prosperity.

As the CEO of the Greater Toronto CivicAction Alliance, Mitzie worked to solve some of our toughest social, economic and environmental challenges. She was also previously the CAO of the Toronto Community Housing Corporation, Vice-President with Goodwill Industries and a Regional Director at Bell Canada.

Mitzie and her family immigrated to Canada from Jamaica in 1975. She grew up in Scarborough, graduated from U of T (Scarborough Campus) with a BA, and recently completed her MBA from the Rotman School of Management.

As part of Kathleen Wynne’s team, serving as Parliamentary Assistant to the Minister of Community and Social Services, Mitzie will bring people together to solve problems, and to create jobs and opportunity in our community.
So, a recent MBA is in charge of the new pension scheme. What could possibly go wrong?

Didn't they have someone with a little more experience?
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Re: New Ontario Pension

Post by OhGreatGuru »

It's a bit of a stretch to say that she will be "in charge of " the new pension scheme. She is an MPP, assistant to the Finance Minister, and there is a government-appointed Advisory Panel with members having distinguished financial credentials. It seems unlikely, with her background, that she will personally be drafting any of it. She will be the cabinet member tasked with steering the process of: consulting stakeholders; seeing that legislation is drafted; and steering said legislation through the house.
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Re: New Ontario Pension

Post by ghariton »

OhGreatGuru wrote: She is an MPP, assistant to the Finance Minister
Not quite.
Newcomer Mitzie Hunter will be named associate minister of finance responsible for the proposed Ontario Retirement Pension Plan
As you say, she won't be alone.
there is a government-appointed Advisory Panel with members having distinguished financial credentials.
On the other hand, the real work will be done by a team of faceless bureaucrats. I wonder whether Ms. Hunter will be instrumental in appointing them.
It seems unlikely, with her background, that she will personally be drafting any of it
.
Politicians never do any drafting. They give instructions to others. The worry is that, given Ms. Hunter's background and past experience, the mandate will include a large proportion of social justice measures, that will serve to greatly increase the cost, while having benefits narrowly targeted at groups judged to be especially vulnerable. If so, the so-called pension plan will degenerate into an extension of social welfare, rather than a leg up to middle-class retirees (whether they need this help or not is another matter).

In other words, another Liberal boondoggle in the making. We have seen this film before.

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Re: New Ontario Pension

Post by slim »

So, if this plan becomes a nightmare, and has enormous costs.........
will transfer payments from the other provinces keep it afloat (using the traditional Quebec strategy)??
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Re: New Ontario Pension

Post by Zipper »

I think it's just leverage to use for an enhanced CPP.
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Re: New Ontario Pension

Post by OhGreatGuru »

Oh Dear. Let the scare tactics begin.

A universal pension plan is social policy, so there's nothing nefarious about appointing someone with a strong social justice background to spearhead the project. In fact you need someone to defend the long-term societal benefits against all the inevitable opposition that will come from short-term thinkers who don't care that Canadians aren't saving enough for retirement, nor that future taxpayers will have the problem of how to support them in their old age as a consequence. (The same bunch who have obstructed expanding CPP)
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Re: New Ontario Pension

Post by George$ »

NormR wrote:Looks like Mitzie Hunter will be in charge of setting up the made-in-Ontario pension plan
...
So, a recent MBA is in charge of the new pension scheme. What could possibly go wrong?

Didn't they have someone with a little more experience?
I think (hope?) it depends on her selection of advisors and common sense - and I'm quite impressed with Kathleen Wynne - thus remain optimistic for the time being with Mitzie Hunter.

Sure hope they don't (like Harper has) go for the advice from the managers who are making big $ bonuses.
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Re: New Ontario Pension

Post by ghariton »

OhGreatGuru wrote:Oh Dear. Let the scare tactics begin.
Boo :!: :!:
A universal pension plan is social policy, so there's nothing nefarious about appointing someone with a strong social justice background to spearhead the project.
Yes, a universal pension plan is social policy. I never claimed otherwise. However, I distinguish between a pension plan that is a mechanism for voluntary or forced saving, without intended redistributive effects, and a pension plan that is actively designed to achieve redistribution.

If you think that redistribution is not an issue, I note that the CPP/QPP was designed originally to be redistributive. It transferred money from the young to the old, in the form of benefits to the first generations of recipients that were well in excess of what their premiums could have purchased. Now I'm not saying that the redistribution was a bad thing. After all, it helped many old people out of poverty, and now Canada's seniors are quite well off, relative to other countries. But at the time the plan was sold to the public as a general pension scheme. The redistribution effects were downplayed. This could certainly happen again.

If the idea is just to supplement pensions, on an actuarially fair basis, why have a social activist, with a strong record of advocating for narrow interest groups, in charge? Surely there are much better suited candidates within the cabinet -- that was NormR's point.

And it is my impression that the Ontario Liberals don't have that strong a record for openness and honesty when dealing with the public.
(The same bunch who have obstructed expanding CPP)
Just colour me obstructionist, then. I'm open to be convinced that there is a crisis in retirement financing, but so far I have not seen convincing evidence. See for example this article --Ontario election reality check: Is there a retirement-savings crisis?.

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Re: New Ontario Pension

Post by ig17 »

OhGreatGuru wrote:A universal pension plan is social policy
New Ontario Pension, as currently proposed, is not universal.

Want to make it universal? Strip public servants and politicians of their DB pension plans. Make them join the same plan that the rest of us great unwashed will be forced into.
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Re: New Ontario Pension

Post by DenisD »

More about CPP than Ontario pension but ...

Andrew Coyne: Forcing Ontario’s chronic under-savers to contribute to new pension plan won’t save money
In the last fiscal year (ended March 31), the board incurred costs of about $1.74-billion, or nearly 1% of the $183.3-billion in assets it started the year with. (The fund now stands at $219-billion.) Of this, about $1-billion was in fees paid to external managers, who invest on the board’s behalf. Another $200-million or so was in transaction costs — the cost of executing trades and acquiring assets. The rest, nearly $600-million, was in general operating costs. In the last four years, total costs have more than doubled; since fiscal 2007, they are up roughly seven-fold.

The choice of year is significant: 2007 was the year the board switched from a purely “passive” investing strategy — that is, simply “buying the index,” seeking to replicate the performance of the broad market in each asset class, rather than trying to pick particular stocks or bonds — to “active” management, including a major plunge into private equity and other relatively risky assets, in hopes of earning higher returns than the average.
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Re: New Ontario Pension

Post by Bylo Selhi »

The choice of year is significant: 2007 was the year the board switched from a purely “passive” investing strategy — that is, simply “buying the index,” seeking to replicate the performance of the broad market in each asset class, rather than trying to pick particular stocks or bonds — to “active” management, including a major plunge into private equity and other relatively risky assets, in hopes of earning higher returns than the average.
FWIW IIRC back then some FWF members expressed the same concerns that Coyne now writes about.
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Re: New Ontario Pension

Post by Springbok »

ghariton wrote: I'm open to be convinced that there is a crisis in retirement financing, but so far I have not seen convincing evidence. See for example this article --Ontario election reality check: Is there a retirement-savings crisis?.

George
Gosh,

That article itself contained a lot of baloney!
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Re: New Ontario Pension

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DenisD wrote:Andrew Coyne: Forcing Ontario’s chronic under-savers to contribute to new pension plan won’t save money
I happened to see a discarded copy of the FT in Tim Hortons yesterday, so picked it up to have something to read. I read that article. Coyne jumps all over the map in his article. He is critical because the CPPIB does not regularly beat the indexes. But then goes on to say that no one really can unless they have info the others do not.

What he does not really address, is how the the investments of the large percentage of the population, who rely on their banks or other mutual fund and GIC salepersons, perform in comparison with that of the CPPIB.

I believe many future retirees will need a larger retirement income. Or collect some type of welfare. With fewer companies offering pensions and jobs much less secure than they once were, a better version of the CPP would be preferable. But if GOC won't do it, good for Ontario for going on their own. Harper says people prefer Tax breaks? Which people? Would those tax breaks benefit those at the bottom of the income scale?

BTW - When did Coyne, who says he invests solely in ETFs, become a financial writer? I thought he was more of a politico.
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Re: New Ontario Pension

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Springbok wrote:Harper says people prefer Tax breaks? Which people?
Me, for one.

I told Warren Baldwin back in 1994 that I would have liked the option of opting out of the CPP. If I had been able to do so, I would be ahead today.
Would those tax breaks benefit those at the bottom of the income scale?
The tax breaks might help people at the bottom of the income scale, depending on how they are structured. On the other hand, we know that the proposed Ontario Pension Plan, as advertised, will not help low-income people at all. Nada. It is aimed at the middle class. So, subject to further details of course, it would be more regressive than tax cuts.

If governments really wanted to help the poor, they would enrich the GIS. But the poor don't vote much, and the middle class do, so we will help the middle class and leave the poor to their own devices. Interesting that you seem to support this.

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Re: New Ontario Pension

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ghariton wrote:I told Warren Baldwin back in 1994 that I would have liked the option of opting out of the CPP. If I had been able to do so, I would be ahead today.
Are you sure? You've mentioned on other threads that you got caught up in the late '90s Internet bubble. As a result "Eventually I lost some two thirds from May 2000 to the end of 2001... And remember, this was the money I was supposed to live off, for the rest of my life."

Are you sure that if the CPP money was yours to invest that you wouldn't have invested it too in Internet stocks, losing most of it too in 2000/2001? So how can you say that you'd be ahead today?
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Re: New Ontario Pension

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ghariton wrote: I told Warren Baldwin back in 1994 that I would have liked the option of opting out of the CPP. If I had been able to do so, I would be ahead today.
Sure, but what about all the other opt-outers who would have spent their share of the CPP contributions, and lost out on the 'employer-match' portion? You'll be paying higher income taxes to fund their GIS payments...
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Re: New Ontario Pension

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Bylo Selhi wrote:Are you sure that if the CPP money was yours to invest that you wouldn't have invested it too in Internet stocks, losing most of it too in 2000/2001? So how can you say that you'd be ahead today?
I think that it would have been part of my fixed income component, which I would have invested in RRBs. Those have done rather well over the last two decades. Why do I think that I would have done this? Well, when I took a lump sum instead of a deferred annuity when I left Bell, that's what I did with the lump sum. Call it mental accounting if you will, but for me in those days, pension money was pension money, and I invested it that way.

But your question raises an interesting point. If a person knows that he or she has a defined benefit pension upon retirement, I suspect that the tendency is to save less on one's own account. The proposed OPP will likely increase savings for retirement by a lot less than first appears.

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Re: New Ontario Pension

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DavidR wrote:You'll be paying higher income taxes to fund their GIS payments...
As it happens, I favour higher GIS payments, and the taxes to fund them. I believe that we as a society have an obligation to help out low-income people. I have much less sympathy for helping the middle class, spendthrift or otherwise.

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Re: New Ontario Pension

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ghariton wrote:I would have invested in RRBs. Those have done rather well over the last two decades.
I know :lol: (My only regrets are in not buying even more and in longer maturities.)
If a person knows that he or she has a defined benefit pension upon retirement, I suspect that the tendency is to save less on one's own account. The proposed OPP will likely increase savings for retirement by a lot less than first appears.
I suspect that those with a predisposition to save will continue to save and those with a predisposition to spend will continue to spend. The proposed OPP won't much affect the former. But it will facilitate forced savings by the latter, hopefully reducing the costs of funding OAS/GIS in the future.
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Re: New Ontario Pension

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ghariton wrote: As it happens, I favour higher GIS payments, and the taxes to fund them. I believe that we as a society have an obligation to help out low-income people. I have much less sympathy for helping the middle class, spendthrift or otherwise..
Me too - those with very little income don't have much ability to save for retirement, through CPP or other means.

Mandatory CPP contributions mean that middle-class spendthrifts are unlikely to qualify for GIS under the current rules. I would rather that such spendthrifts be forced to save a little more, rather than passing the costs of their retirement on to the next generation. I would not let them opt out of CPP.
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Re: New Ontario Pension

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ghariton wrote: It is aimed at the middle class. So, subject to further details of course, it would be more regressive than tax cuts.

George
Those that are in the middle class when working could very well be amongst the poor once they retire. As I understand it, that is what is foreseen and why governments are concerned. Better to encourage retirement saving during working years than provide GIS or welfare in retirement (which we all will fund)
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Re: New Ontario Pension

Post by parvus »

OhGreatGuru wrote:Oh Dear. Let the scare tactics begin.

A universal pension plan is social policy, so there's nothing nefarious about appointing someone with a strong social justice background to spearhead the project. In fact you need someone to defend the long-term societal benefits against all the inevitable opposition that will come from short-term thinkers who don't care that Canadians aren't saving enough for retirement, nor that future taxpayers will have the problem of how to support them in their old age as a consequence. (The same bunch who have obstructed expanding CPP)
Scare tactics? There is when a) you're using it as leverage for an expanded CPP; b) it will not provide a full benefit until 40 years after its planned 2017 inception; c) when it seems like a reponse to a grandstanding lobby of about-to-retire types who will get no benefit (but who have Moses Znaimer, late of Much Music, as their patron).

Under our current system, OAS/GIS does a pretty good job. Not a fantastic one. If we want to increase the wages of poverty, we can do it through taxes for more OAS/GIS, and set the OAS clawback lower for affluent retirees, to share the wealth. In our Hobbesian society, we durst not request of the seniors lobby that entitled seniors give up rights wrested from the Sovereign at Runnymede.

But that issue never came up.

Another issue that never came up is workless youth. They are likely to have spotty employment records 40 years hence. So the new benefit will likely force them to reliance on whatever form of GIS exists in the future.

The Sons and Daughters of the Greatest Generation Ever were never frugal, unlike their Great Depression parents, and so racked up bills to pass onto their children, and their children's children, in the form of deficits and free lunches for education and health care. And now they still want to foist the bill on their children, and their children's children.

But that issue never came up.

This whole scheme is a silly dodge that plays to middle-class anxieties -- but won't resolve them, not now, not in 40 years.

But that issue never came up.

Boomers were stuck in the Hotel California.

We don't, repeat, we don't have a pension crisis in Canada. What we have is a bunch of people who spent too much buying houses and not saving. It doesn't matter for the poor: they rent. It doesn't matter for the rich (those making over $64K) because they either have corporate/government pensions or were smart enough to use the RRSP alternative.

It matters for the 40% of the Ontario population who make more than $30k but less than $64k. Will it help them? In 40 years time, yes, if they have a continuous job history.

Will it help them now? No. Not at all.

This is an entirely spurious initiative. Yes, sure, we need to reform workplace pensions, because increasingly only civil servants are getting them. Yes, certainly, we need to reform contribution rates, so that civil servants are equal payers. Yes certainly we need to look at target benefit plans, so that employers and employees share the investment risk -- to avoid another Nortel pension mess.

An Ontario CPP doesn't do this.

Even an improved CPP doesn't do this.

This is going to be a long and painful process whereby workers come to understand that deferred compensation is just that -- not a company freebie but a tax on current wages.

It's quite simple math. But it's going to make for a quite controversial change in the discourse of collective bargaining and, indeed, of politics. Honesty might intrude, at very long last.

In the interim, what we can best do to prevent near-retirees from losing their houses, their cars, their snowmobiles and their travel plans is not to go through the legerdemain of promising them something they will never get, but to get them to face the facts. Absent a pension/lifetime savings, you're going to have to cut your debt, liquidate assets, freeze your spending.

Because this is the reality of OAS/CPP/GIS, which will replace roughly 40% of your salary up to the average wage of $52,000.

That's your fate: $21,000 a year. Live with it.

The politicians can't fix it, certainly not right now.
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Re: New Ontario Pension

Post by parvus »

Springbok wrote:BTW - When did Coyne, who says he invests solely in ETFs, become a financial writer? I thought he was more of a politico.
I've met him at socially responsible ETF events. :wink:
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Re: New Ontario Pension

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DavidR wrote: Mandatory CPP contributions mean that middle-class spendthrifts are unlikely to qualify for GIS under the current rules. I would rather that such spendthrifts be forced to save a little more, rather than passing the costs of their retirement on to the next generation. I would not let them opt out of CPP.
But this is semantics.

Yes, OAS/GIS are funded out of current tax collection. But so, for the most part, is CPP -- 25% of current payments come from the investment portfolio. The rest is from incoming contributions.

Yes, I know, I have no economics training. But let's look at this as a shell game (which I think it is). We tax you now to pay our elder obligations (OAS/GIS). We force you and your employer to fund your retirement (CPP) hoping that, despite our loss in tax revenue -- a tax expenditure worth billions -- we will at least make the system self-funding and your higher taxes on retirement will recoup our costs. Finally, we give you a significant tax expenditure for your pension/RRSP investments. It also costs us billions to support this. If you can beat the Bank of Canada rate, great, perhaps the economy grows. Even if it doesn't, we gave you a subsidy for your investments. In retirement, it's payback time -- for all the money you didn't have to pay for OAS/GIS at the time. Plus a return on investment.

Mebbe I'm thinking too much like a capitalist here. OAS/GIS are immediate expenses. CPP is deferred wages, tax-advantaged -- a sinking fund, basically, like a municipal bond. RPPs/RRSPs are investments, which may or may not work out, but the government is the co-investor.
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Re: New Ontario Pension

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My concern is that we aging baby boomers are projecting our recognition of our own mortality and focus on retirement savings onto a younger population whose focus should be more on providing for their families and getting debt under control.
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