Andrea Horwath calls for publicly run Ontario Retirement Plan

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George Victor
Andrea Horwath calls for publicly run Ontario Retirement Plan

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George Victor

Torstar's columnist at Queen's Park, Jim Coyle, today applauded Andrea's lead on this issue...(she has) "shrewdly tried to seize it as her own, calling for a pblicly run plan to help the 65 per cent of Ontarioans who do not have a work-based pension.

"To the NDP's credit, MPP Paul Miller was dispatched over the summer on a provincewide tour to investigate pensions. " And Horwath said OPntarians "have told us they want a retirement savings plan that will let them retire with security, dignity and the quality of life they've worked hard to build."

Coyle said "Andrea Horwath seems up for the job," of "pension champion" that was called for in a provincial report a year ago.

 

Michelle

I love it!  Good for her!

Sunday Hat
Bookish Agrarian

This is a great move and shows how clear thinking Andrea Horwath is - straightforward, easily understood and would benefit the average person. 

antsunited

Sexy and Andrea and Pensions all in the same story! Good for her and good for us. Was hoping not to have to eat cat food when I get old(er)

madmax

  So many people pensions are in jeopardy or they will never have one and something has to be done.

Kudos to Andrea.

 

Michelle

Well, it said "unsexy" - but only in the context that it used to be an unsexy issue, but now it's right up there with real estate in small talk conversations.

BTW, love your alias, antsunited - welcome to babble. :)

Pensions are a huge issue.  I don't care whether they're addressed nationally or provincially, as long as they're addressed, and I'm happy to see the NDP at both levels of government focusing on it.

ndpman

The pension issue looks like a sure bet to gain traction with the electorate.  A smart move towards a propose not oppose politik.

Jacob Richter

Few and far in between are people like Ms. Horwath who have the potential to see the bigger picture by linking with the workforce as a whole.

Snert Snert's picture

Maybe I'm just feeling pessimistic today, but I can't help thinking of public auto insurance, and what a great, forward-thinking idea that was too.

DaveW

more details would help: what is this plan to be funded from? general provincial revenues? a new tax line?

what would be its relation to Canada Pension Plan -- like Quebec Pension Plan to CPP? complementary, or something different?

On what basis are its pension levels determined: not on income, if it's not employment/revenue-based.  Hence, on what?

Any foreign models?

 

 

George Victor

Yep, looking forward to seeing all those questions answered.

Scott Piatkowski Scott Piatkowski's picture

Here's a cut and paste from a backgrounder that Caucus Research prepared (sorry, no link... Im got it by e-mail). No copyright issues with posting the whole thing, because they want people to see it.

BACKGROUNDER

January 11, 2010

Ontario NDP's Ontario Retirement Plan (ORP)

Context

On Dec. 18, 2009 federal, provincial and territorial finance ministers met in Whitehorse and agreed to study further options to enhance Canada 's pension plan system. The options target the estimated 65% of Canadians without workplace pension coverage. The ministers plan to meet again in May, 2010.

At the Whitehorse meeting, a paper by University of Calgary taxation expert, Jack Mintz, commissioned by Finance Minister Flaherty, played down the suggestion that there is a pension crisis - a controversial conclusion that conflicts with the opinion of the NDP, the CLC and CARP, among others.

In the absence of leadership from the federal government, the initiatives on the table come from the federal NDP, CLC, CARP, and a number of provinces and territories who feel they can no longer wait for a federal proposal.

In that environment, the Ontario NDP clearly had to develop a proposal on behalf of those without workplace pensions in that province.

Ontario NDP's Ontario Retirement Plan (ORP)

"The Ontario NDP supports federal action to enhance the existing CPP benefit along with the other elements of the CLC and federal NDP pension reform proposals. However, should the Harper government not show clear signs of significantly enhancing the existing CPP benefit in the next few months, the Ontario NDP strongly believes that the province of Ontario should implement the following proposal."

  • The ORP is a voluntary CPP-style defined benefit plan paying a maximum benefit of $600-700 per month (partially indexed) designed for the approximately 65% of Ontarians without workplace pension coverage.
  • Automatically enrols employees without a pension plan that matches or exceeds the ORP benefits, but employees can opt out within 3 months of enrolment. Locked in after that (with exceptions).
  • It also allows for an opt-in at any time and purchase of past service credits, including use of an RRSP transfer for this purpose.
  • The plan is portable from workplace to workplace.
  • Employers are required to contribute as long as an employee chooses to belong.
  • Employer and employee contribution rate is 3% (approximately equal to premium for doubling CPP). Contribution rate is phased in over 5 years for employees, longer for employers.
  • Premiums pegged to same "pensionable" earnings as CPP ($3,500 - $46,300).
  • Management by an existing public fund manager (eg. OMERS or OTPP).
  • There is also the option for small pension plans to join the ORP, purchasing past service credits.

Commentary

  • In the absence of federal leadership that focuses on improving the national, universal, portable, public option - a stronger CPP - this is a very good proposal, embodying many of the features of the reformed CPP advocated by Jack Layton's federal New Democrats.
  • Our preference continues to be a plan for all Canadians wherever they live, but with so many Canadians needing action now to provide financial security for their retirement savings, it is understandable that the provinces cannot wait forever for Mr. Harper to act.
  • We believe, nevertheless, that Canadians will not be as well served by a patchwork of provincial plans that supplement the CPP, and other less effective alternatives, than they would be with a stronger more flexible CPP.
  • We will continue to advocate that national alternative - the pension equivalent to Medicare - alongside the CLC, CARP and others.

Scott Piatkowski Scott Piatkowski's picture

As with the HST campaign, this is another good example of the federal NDP caucus working together well with their provincial counterparts.

Polunatic2

I like the sounds of this initiative but I would expect a huge reaction from the business "community" on this one: 

Quote:

  • Employers are required to contribute as long as an employee chooses to belong.
Could a fall-back position allow employees to buy-in (at a higher rate I suppose), even if their employer is not offering this as a benefit? And I wonder how far back the buy-back would  extend? That could get expensive couldn't it? Would employee and employer share those buy-back costs? 

 

Michelle

I don't think so.  Employers have no choice right now but to pay the employer portion of the CPP.  They should have no choice on this one either.  That's the idea of a public pension plan - both the employee and the employer pays, and all employers pay it so that it's transferable, no matter what job you have or how often you change jobs.

Bookish Agrarian

The costs won't be insubstantial, particularly for small business.  However, unlike some other spending it would be a direct right down against profits.  So in the end they would net out the same as without the plan. 

This is a good idea all around. 

Query for those in the know - would farmers be able to pay into this plan?  I don't know if you have seem the farmer pension plan, but it essentially amounts to a shovel, a bucket and a big mound of manure.

Polunatic2

Makes sense. I think I may have confused a "benefit" with a "right". 

George Victor

In other words, selling the farm at retirement is it, BA!

"Maximum benefits of  $650 per month + or - and "maximum" contributions per month from the employee and employer....begins to fill the threatened gap.  But what are the lower levels of benefits that might result?  Perhaps a major benefit will be a tendency to renew attention to the need for savings.  And hopefully, investments in socially responsible and supportive agencies can be found and created.  Just learned today that a local car-share agency is open for investment opportunity (don't know the cost of shares). There's also opportunity for investment in wind farms, etc., all a far supeior end fate for savings.

George Victor

The need for another plan was reinforced today in a Globe editorial showing that RRSP contributions peaked in 1997 at 5 per cent of income, and as of  2008 were down to 3.5 per cent, according tio an RBC study, which predicted that this decline will continue until 2020.

The, then, registered retirement annuity was first announced in the last budget of Louis St. Laurent government in 1957. "Forty-three years later, everybody knows about RRSPs, but neither company pension plans nor RRSP contributions are instilling much confidence - and investment addvisers are fearing fror thei commissions. Both the retirement incomes of Canadians and the pool of savings available for investment are at resk.  For the Globe editorialist , its all "worrying at a time when there are alr3ady widespread doubts about whether Canadians now working will have enough retirement income, from pensions and other sources."

And of course, a great many among the generalized "Canadians" will be far, far short of an adequate retirement income. But perhaps an increasing number do not have enough left over to contribute anything...let alone those marvelouos tax-saving amounts on offer.

Michelle

Another thing about RRSPs - they cost way, way more to administer than public plans or large group plans like the teachers' pension or whatever.  I heard a talk recently by an economist with the CLC, who was saying that the Canada Pension Plan, for instance, only costs a fraction of a percent in administration costs, whereas when you buy RRSPs individually, it's maybe two or three percent, somewhere around there (I think that's what he said) and this makes a huge, huge difference in the end.

George Victor

And 3 per cent doubles your money in 20 years, I believe. Our new market expectations will have to be not much more than that in pensionland. But relatively risk free.

Scott Piatkowski Scott Piatkowski's picture

[url=http://network.nationalpost.com/np/blogs/fpcomment/archive/2010/01/13/co... Horwath responds to Terrance Corcoran[/url] in today's National Post (because, surprisingly, he didn't like the idea). 

Quote:
Despite Mr. Corcoran's claims to the contrary, the aim of our proposal is simply to provide a flexible and worry-free way of saving for retirement. Sixty-five percent of working Ontarians currently lack a workplace-based pension plan. They're worried they won't have enough to retire on. Despite efforts to save, they feel like they're falling behind.

People want the chance to retire from their jobs knowing they can enjoy their golden years. Unlike Mr. Corcoran, I believe the vast majority of Ontarians would welcome a little help from their provincial government. Not taxpayer subsidies but a simple and predictable way for individuals and their employers to contribute to financial independence during their retirement years.

There has never been a more opportune to time to think creatively about new ways of encouraging retirement saving. The global financial meltdown resulted in billions of dollars disappearing from individual RRSPs when markets around the world lost 40% or more of their value in a matter of months.

And the problem with private solutions like RRSPs isn't just related to the recent economic crisis. Toronto-Dominion chief economist Don Drummond recently noted: "After 50 years of promoting RRSPs, we have to conclude they haven't turned out as envisioned."

But there are success stories. In Ontario, pension plans like OMERS, the Ontario Teacher's Pension Plan and the healthcare sector's HOOPP provide a reliable retirement income for thousands of people every year. And the Canada Pension Plan continues to quietly and reliably provide every Canadian with a small retirement income. These are models that work.

Last month, provincial and federal finance ministers met to discuss the crisis in retirement income. Various options will be considered at a subsequent meeting, likely in the spring. But no one - including the other provincial premiers - has any idea where Dalton McGuinty stands on this vital issue. That has to change and that is a key reason why Ontario New Democrats unveiled our plan earlier this week.

We will continue to work with groups across the country to expand the Canada Pension Plan. But we can't wait for Stephen Harper to see the light. People in Ontario want to prepare for their retirement now and their provincial government can make that easier.

An Ontario Retirement Plan would be a publicly-run, "targeted" benefit plan much like the Ontario Teacher's Pension Plan. In order to maximize participation, every employee not enrolled in a workplace pension plan would be automatically enrolled. But the plan is not mandatory. If you have a better way to plan for your retirement, you don't have to take part. And later, if you decide that the plan is something you can use, you can opt in.

On retirement, the maximum benefit from the plan would be between $600-$700 per month in 2010 dollars while maximum monthly contributions from employers and employees would be just under $100 per month.