Best DB Plan?

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Pension12345
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Best DB Plan?

Post by Pension12345 »

Hi Everyone,

Just thought I'd throw this out there as a hypothetical question:

Based on your knowledge of Defined Benefit pension plans, which one would you join in if given the choice of any, and why? Ontario Teacher's Pension? HOOPP? OMERS?

Interested in people's perspectives.
fireseeker
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Re: Best DB Plan?

Post by fireseeker »

Hi P,
It's not clear why you are asking this.
A teacher can't join HOOP, a hospital worker can't join OMERs and a government employee can't join OTPP.
Your pension plan (or lack thereof) is a product of your occupation, not the other way around.
Pension12345
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Re: Best DB Plan?

Post by Pension12345 »

Hi F,

let me make it more clear for you:

As the original question is hypothetical, I asked it to generate a bit of discussion around how this online community perceives each pension plan from a holistic perspective. For example, as a teacher, you would be absolutely right in stating that you can't join HOOPP, but are there features of HOOPP you wish you had and vice versa? There are many differences and varying benefits between plans and it would be interesting to hear perspectives on what features people value most.

Suppose that on day one of your employment, you were handed a menu of the top 25 DB plans in Canada and asked to pick one moving forward. Is there one that is the envy of them all?
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AltaRed
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Re: Best DB Plan?

Post by AltaRed »

How much do you want to contribute since they likely all have different contributory amounts?

It is not as simple as which one is best. Some may want to pay up for a DB plan so generous that the individual doesn't have to take ANY responsibility in additional savings to supplement their DB pension. Others may not want to be so fully committed to a rich pension plan because they might die prematurely, or not stay long enough to collect, or think they can put a better investment plan together that is even better than the best DB plan. DB plans are sometimes known as 'ball and chain', 'golden handcuffs', etc.
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OhGreatGuru
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Re: Best DB Plan?

Post by OhGreatGuru »

Might be an interesting research project for a grad student, doing a comparative analysis of several DB pensions. But not too many people are likely to know much about plans other than the one to which they belong (if any). And of not much practical use to most people, other than those who are directly involved in either managing or negotiating pension plans. So I suspect the response is likely to be limited.
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ghariton
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Re: Best DB Plan?

Post by ghariton »

AltaRed wrote: 19 Jul 2017 15:46 DB plans are sometimes known as 'ball and chain', 'golden handcuffs', etc.
From what I experienced (so anecdotal) DB plans did indeed act as golden handcuffs. Indeed, I was told that many DB plans were designed that way. This can have the unfortunate side effect of incenting people to stay in jobs which they have outgrown, precluding consideration of more interesting career opportunities.

As to the "best" DB plan, as AltaRed says, that depends on the entire package, and that varies tremendously, making comparisons difficult. One consideration I would find important is the probability of some kind of default, i.e. not getting all the benefits that you are expecting. On this dimension, I would think that public sector pension plans are more secure than those in the private sector.

The other important point is that it is the total compensation plan, and how it is structured, that is important, not the DB pension in isolation. For example, is a more generous DB plan being offered in exchange for a lower salary? These are very difficult calculations.

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Chuck
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Re: Best DB Plan?

Post by Chuck »

I'm guessing the 'best' plans are all federal or provincial civil servant plans. The MP plan probably the most generous of all. By best I mean least money put in by the employee relative to the size of the payout.

It's always easy to be generous with taxpayer money.
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