07/15/2014 05:40 EDT | Updated 09/14/2014 05:59 EDT

Ontario Must Make the Retirement Pension Plan a Priority


The elections of June 12 provides the Wynne government with an even stronger mandate than it did, when the provincial Liberal budget was first pitched. Public opinion on the pension plan, however, is still ragged and disparate at best. Hudak's conservatives brace for an Ontario credit downgrade while, of all people, NDP Leader Andrea Horvath vocally calls for spending cuts and deficit elimination above all other social policy or economic growth considerations.

Misgivings aside, Ontario must now fix its gaze on the proposed budget's most innovative reform proposal: the Ontario Retirement Pension Plan. Can the province afford to save more and reduce the deficit with the same throw? Yes it can. In fact, it essentially must, if upcoming experiments in divestiture, incoming job cuts, and deficit-reducing reorganizations pose a threat to Ontario's economic outlook in the short-to-medium term. Especially in light of the impending threat to that is the province's retirement crisis.

The Ontario Teachers Pension fund's retiring CEO, Jim Leech, ex-Prime Minister Paul Martin, and other capital markets veterans point out that we have an impending pensions and retirement crisis in our hands. Ontarians are living longer, are saving less, and the cost of living is fast outpacing savers as they reach old age. In addition to this, the post-2008 global economy is such that Canadians' pension dollars, set aside through existing Canada Pension Plan arrangements, will yield lower returns than expected amid a sluggish, low-inflation, low and slo-growth recovery.

Still not concerned? The size of your existing pension plan such as it is, already moving from defined benefit (all you can eat) to defined contribution (pick what you must have), will decrease as a whole; leaving you with a thinner coverage. Conservative cabinets will expect you to day-trade your way away from retirement poverty, a move more likely leave tax-payers who are least financially expert open to stock market schemes and losses of various sorts. A very different take on personal responsibility indeed.

The proposed Ontario Pension Plan would manage $3.2 Billions of assets, paid for by a 1.9 per cent of payroll deduction for employees, matched by their bosses, for those not already covered by similar or superior retirement plans. Entrepreneurs and the self-employed would also be considered for complementary coverage when legislation is passed to allow for extended Pooled Registered Pension Plans (PRPPs) to amount to about 40 per cent of their pre-retirement income. To offset the additional expense on employers, the plan would only come into effect when income insurance premiums are correspondingly lowered, in 2017. Interestingly enough, the provincial Liberals plan to allow this pool of savings to be re-invested in Ontario if need be, likely in planned infrastructure and economic development projects.

Where do other provincial leaders stand on this issue? Tim Hudak stands with his federal sponsors MP John Baid, Tony Clement, and Pierre Pollievre against the plan. According to them, this plan is little more than a tax on Canadian business, one that will only add complexity and bureaucracy to retirement planning. Ontario NDP Leader Andrea Horvath stands in support of a proposed Ontario Pension Plan in principle, though most interviews she's given on the topic points to her faith in Thomas Mulcair as the upcoming Prime Minister of Canada to begin thinking about this problem.

Arguably a courageous bet or, irresponsible procrastination on the beleaguered NDP leader's part. Kathleen Wynne and the Ontario Liberals already moved head with the plan, consulting OMERS (one of our major pension funds) and Teacher's Pension plan within a prior to the elections, having appointed a Technical Advisory board to spearhead the pension fund's creation as early as Fall 2014.

Anyone concerned with the issue of old age poverty, retirement security, or even infrastructure investing in Ontario should, in principle, be in favour of this pension proposal. Tim Hudak had no plan to address this pension crisis and the provincial Conservatives are, in fact, out of the picture on this issue. There is very little disagreement between the Ontario Liberals and the Ontario NDP when it comes to the need to restructure existing federal and provincial retirement coverage, with or without federal impetus.

Supporting employee's currently embattled efforts to save enough for retirement should be a provincial priority in the age of the welfare state in retreat. Whether Stephen Harper's Conservatives or Justin Trudeau's Liberals form the next Federal government, it's essential that Ontario's Liberals be proactive enough to articulate and execute a workable and collaborative version of this solution to old age poverty. Indeed, it is terribly inconvenient to run out of money three years before you die, in one of Canada's most expensive provinces.


Ontario Budget Highlights