: Pension and Retirement Income System Reform

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Strengthening Ontario's Retirement Income System

Nov 29, 2013

Ontario is asking for public input on Securing our Future: Strengthening Retirement Income in Ontario through Pooled Registered Pension Plans, a discussion paper that lays out a framework for implementing pooled registered pension plans in the province. 

In the 2013 Fall Economic Outlook and Fiscal Update, Ontario announced a bold new plan to strengthen retirement income.

Letters Of Credit For Employer Sponsors Of Public Sector Single Employer Pension Plans (SEPPS)

Oct 28, 2013

In May 2011, the government provided temporary solvency funding relief to public-sector SEPPs.  The relief is provided in two stages, with eligibility criteria attached to each stage. In exchange for the relief, plans commit to explore plan changes that would improve sustainability and affordability in the long term.

Since the introduction of the program, many of the plans that entered into the relief regime have made significant progress towards long-term sustainability.  However, continued low long-term interest rates and volatility in financial markets still present a significant risk for pension plans.

Additional Temporary Solvency Funding Relief For Employer Sponsors Of Public Sector Single Employer Pension Plans (SEPPS)

Oct 23, 2013

In May 2011, the government provided temporary solvency funding relief to public-sector SEPPs.  The relief is provided in two stages, with eligibility criteria attached to each stage. In exchange for the relief, plans commit to explore plan changes that would improve sustainability and affordability in the long term.

Since the introduction of the program, many of the plans that entered into the relief regime have made significant progress towards long-term sustainability.  However, continued low long-term interest rates and volatility in financial markets still present a significant risk for pension plans.

Resources

The Pension Benefits Guarantee Fund Final Report

Introduction

The Pension Benefits Guarantee Fund (PBGF) provides protection to Ontario members and beneficiaries of privately sponsored single-employer defined benefit pension plans in the event of plan sponsor insolvency. It is the only fund of its kind in Canada and is administered by the Superintendent of Financial Services for the Financial Services Commission of Ontario (FSCO). The PBGF is intended to be self financing through annual premiums based on per-member and partially risk-related fees. Participation in the PBGF is mandatory for most defined benefit pension plans registered in Ontario.

Read the Full report

Ontario Position on Retirement Income System Reform

Minister Duncan's letter to Federal, Provincial and Territorial Finance Ministers June 10, 2010

Prior to the June 13 – 14, 2010 finance ministers meeting in Morell, Prince Edward Island, Finance Minister Dwight Duncan communicated Ontario's position on retirement income system reform in a letter to federal, provincial, and territorial finance ministers. The text of this June 10th, 2010 letter is posted below in the English and French versions.

In the lead-up to the upcoming Finance Ministers' meeting in Prince Edward Island, I wanted to take the opportunity to communicate with you about Ontario's position on strengthening Canada's retirement income system. I have appreciated the opportunity to work together constructively on this important issue, and trust we will continue to have the opportunity to do so in PEI and in the months beyond.

I have become increasingly concerned, especially since the global economic downturn, that many Canadians are not saving adequately for retirement. Recent research, policy work, and public consultations have confirmed that although our retirement income system has many strengths, a significant minority of Canadians in the future are likely to experience a material decrease in their standard of living upon retirement unless changes are made.

Ontario supports a pan-Canadian approach to the reform that will provide tomorrow's seniors with better, lower-cost tools to maintain their standard of living in retirement. Reforms should build upon the strengths and institutions of the existing retirement income system, which has significantly reduced poverty among seniors and currently allows most Canadians to maintain a similar standard of living before and after retirement.

Ontario supports a multi-pronged approach to reform that would strengthen both the second and third pillars of the system.

First, I believe we can make regulatory changes to harness Canada's world leading private-sector expertise, including financial institutions and others, to provide more efficient, lower-cost retirement options. Current tax and pension rules say that defined-contribution pension plans can only be offered where there is an employment relationship. This limits the retirement savings options available to the self-employed and those who work for small businesses. By changing these laws, we can expand the range of people who can set up pension plans, and the range of people who can access them. We could allow large, multi-employer defined contribution pension plans with low administrative costs to provide portable coverage to more Canadians.

Second, I believe we should seriously consider building on the strengths of the CPP through a phased-in, moderate increase to retirement and survivor benefits. CPP's guaranteed benefits are secure, inflation-indexed, and portable. The average CPP benefit is about $6,000 per year and the maximum is about $11,000 per year – lower than the public employment-related pensions of most other similar countries. Any improvements would have to be pre-funded, intergenerationally equitable, and affordable for working people and employers.

Ontario, like many other jurisdictions, is also modernizing the legislative framework for existing defined benefit pension plans and looking at ways to foster innovation in the future. We would welcome opportunities to work together to strengthen this important component of the retirement income system and improve the regulation of these plans across jurisdictions.

Sincerely,
Dwight Duncan
Minister

Roundtables on Retirement Income

The Honourable Dwight Duncan, Ontario Minister of Finance, is hosting discussions on the retirement income system with individuals, organizations, associations and other stakeholders as part of the Ontario’s review of options for improving retirement income security for tomorrow’s seniors. 

The objectives of this retirement income system dialogue are:

  1. To hear Ontarian’s thoughts on today’s retirement income system;
  2. To obtain suggestions on how to improve Canada’s retirement income system;
  3. To solicit comments on the options proposed;
  4. To encourage discussion of trade-offs and costs; and
  5. To identify areas of common ground or compromise among stakeholders.

The focus of the discussion will be around the following three questions:

  1. What are the strengths and weaknesses of Canada’s retirement income system?  What research or evidence demonstrates that people are not saving enough for retirement?  How would you define “enough”, and how much weight should be placed on personal choice?
  2. What are some of the possible options government should consider in strengthening Canada’s retirement income system for tomorrow’s seniors?
  3. How would your options or proposal be implemented? Please provide details of how your proposal would work, what you think it might cost, how costs would be allocated (among employees, employers, tax payers, etc), and how other stakeholders may be affected.

Research Study on the Canadian Retirement Income System

In preparation for the Federal-Provincial-Territorial Financial Minister’s Meeting in Whitehorse, the Ontario government commissioned Bob Baldwin, a recognized expert on pension policy, to prepare a report on the capacity of Canada’s retirement income system (RIS) to provide retirement incomes in the future. 

Bob Baldwin was an Expert Advisor for the Ontario Expert Commission on Pensions and former Director of Social and Economic Policy for the Canadian Labour Congress.

Ontario has been working together with stakeholders including pensioners, unions, plan members and sponsors, as well as with the federal government and other provinces and territories, to examine how Canada’s retirement income system can be strengthened for future retirees. The federal government produced its own report, written by tax expert Jack Mintz.

Expert Commission on Pensions

In fall 2006, the government established an Expert Commission on Pensions (the Commission) to conduct an independent review of the Pension Benefits Act and regulations as they pertain to the funding of defined benefit pension plans and related issues. 

The Commission released its final report, A Fine Balance: Safe Pensions, Affordable Plans, Fair Rules, in November 2008 and the following comment period provided the government with focused feedback from interested Ontarians. 

The Ministry of Finance received numerous submissions on the Report of the Expert Commission on Pensions.

The government is currently reviewing the comments received.

LEARN MORE

Final Report of the Commission: A Fine Balance - Safe Pensions - Affordable Plans - Fair Rules
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