April 2010: We reached out to a variety of politicians and invite them to inform our readers of their views on pension reform by drafting a position statement for publication. Here are the answers we received:
The Ontario NDP strongly supports federal government action to enhance the existing CPP. However, we also feel quite strongly that there are advantages to having a “supplemental”, public pension plan. We also believe that action must be taken now and that we simply can’t wait for the Harper government to act. Therefore we propose the establishment of a complimentary, supplemental, public pension plan that could be established on a provincial, regional or national basis. The Ontario NDP proposes its Ontario Retirement Plan as the best model for such a “supplementary”, public plan.
The NDP’s Ontario Retirement Plan design The nature of the benefit The benefit we are proposing is a “targeted” benefit plan with only partial cost of living indexing guaranteed (much like the Ontario Teachers Pension Plan). Unlike a defined contribution plan, the assets of the plan are invested for the plan as a whole, and not on an individual basis (i.e. it is a “pooled” fund). Also, unlike a defined contribution plan, the longevity risk is spread across all plan members so members can’t outlive benefits. Spreading the longevity risk over all plan members allows for the average level of retirement benefit to be higher than it would be under a Group RRSP or Defined Contribution pension plan.
The maximum basic benefit provided by the plan would be in the range of $650 – $700/month in 2010 dollars. Plan members would be able to opt out and those who initially opt out would be able to make up some of their lost contribution time through a retroactive purchase of “past service” credits. This option would also be available to older workers who, through no fault of their own, were not able to contribute fully to the ORP during their early working years. An RRSP transfer option could also be used to purchase “past service” credits. It would not be mandatory for employers to match any past purchase of “past service” credits. It should be noted that this “purchase of past service” credits is in the context of a common monthly benefit entitlement, not for the purposes of an enhanced benefit entitlement.
Automatic Enrolment and Opting Out
Every Ontario employee not enrolled in a pension plan that matches or exceeds the benefits provided under the ORP would be automatically enrolled in the ORP. All automatically enrolled employees have the freedom to opt out individually and all employees that have opted-out could opt back in any time they want. Basically, if you feel you have your retirement savings under control, you can stick with your present approach by opting out. If you feel the ORP would be right for you, then no further action would be required on your part after you are automatically enrolled. Experience from other jurisdictions such as the U.K. and New Zealand suggest that a time-limit for opting-out would encourage fund stability. Individual employees with no pension plan who opt out would be automatically re-enrolled in the plan three years from the day they opt-out and would have to opt-out again if they wanted to remain outside the plan.