Finance minister introduces bill to create provincial pension plan

The Ontario government has introduced legislation that would help retirees in the province by creating a provincial pension plan.

The Liberals introduced the Ontario Retirement Pension Plan Act at Queen’s Park on Monday afternoon. If passed, it would clear the way for the Ontario Retirement Pension Plan (ORPP) with a goal to have it in place by Jan. 1, 2017.

The plan would be mandatory for workers who don’t have a company pension plan, and would be administered by an “arm’s-length entity.”

At a news conference on Monday morning, Finance Minister Charles Sousa said there are some critics who argue the plan helps the government instead of people, but he said they are wrong.

“These are premiums, these are contributions made by an individual into their savings plans for themselves. None of this money comes to the coffers of the government,” Sousa said.

Formal consultations on the ORPP will begin in January 2015

Along with the pension plan, the Liberals introduced the Pooled Registered Pension Plans Act — pooled asset management and the ability to convert employer-sponsored, single-employer pension plans to jointly sponsored plans.

Statistics show less than 35 per cent of Ontario workers have a pension plan at their company, and only 28 per cent of private sector workers have such a plan.

Below is a background of the Pooled Registered Pension Plans, or click here for a mobile-friendly version.

Pooled Registered Pension Plans background

The Liberal government admits it would prefer an enhancement to the Canada Pension Plan (CPP) over setting up its own provincial plan, but it can’t get the federal Conservatives to agree.

The retirement savings plan, including the ORPP, is a cornerstone of the Liberal’s agenda. Premier Kathleen Wynne first proposed some changes last December after the federal government ignored calls from several provinces to enhance the Canada Pension Plan.

“We know people are not saving enough. We know that we need to put in place a system that will give people some confidence in their retirement,” Wynne told 680News’ John Stall at the time.

Below are some factors that lead to a retirement savings gap, or click here for a mobile-friendly version.

Retirement Savings Gap background

During the Ontario election campaign, Prime Minister Stephen Harper and his Conservative government criticized the plan, calling it a tax on Ontarians and a disincentive for companies to operate in the province.

However, at the news conference, Sousa and Associate Finance Minister Mitzie Hunter rejected criticism from business groups that say forcing companies to match employee pension contributions to a new pension amounts to a payroll tax.

“The date that we’ve selected — Jan. 1, 2017 — coincides with the expected reduction in EI premiums previously announced by the federal government,” Hunter said.

“We also will be phasing in contributions over two years, and also we will be ensuring that we enroll the largest corporations first, which is of benefit to small businesses.”

When the Liberals first introduced the plan, the ORPP was billed as a mandatory plan that will be modelled on the CPP and could be absorbed into the national program if the federal government agreed to a CPP enhancement in the future.

The CPP, established in 1965, currently provides retirement benefits to contributing workers up to a maximum of about $12,500 annually — an amount that critics have said isn’t enough for many in retirement.

Ontario’s plan, however, won’t apply to all the province’s workers — those with “comparable” workplace pension plans, federally regulated employees and those with income below a yet-to-be-determined threshold would be exempt.

With an aging population and a decrease in private pension plans, retirement savings has become a pressing issue for many.

Over the last seven years, the number of Canadians working past the age of 65 has almost doubled, according to a report from market research firm The Strategic Council released last month. And a majority of Canadians say they will rely heavily on the CPP benefits during their retirement.

Studies also show many Ontarians won’t have enough savings to maintain a similar standard of living during their retirement.

With files from The Canadian Press