In a fair society, people should have options to save for retirement so that they can retire with peace of mind.
Ontario is committed to a strong and secure retirement income system to help ensure that today’s workers maintain a comparable standard of living when they retire.
Evidence from pension experts, financial leaders and research institutes continues to show that many moderate- to higher-income Canadians could face inadequate incomes in retirement. This is due to increasing longevity, lower personal savings, increased personal debt and decreasing employment pension plan coverage.
Many people in Ontario rely on employment pension plans for a significant portion of their retirement income. Coverage, however, has been declining in recent years and many defined benefit plans for private-sector employees are closed to new entrants. There are calls for new, more flexible retirement savings options that would enhance coverage, improve retirement income security, and enable plan sponsors to better manage plan costs.
A recent report released by CIBC World Markets Inc. warns about these trends.
Its research found that, in the absence of policy change, nearly six million younger workers in Canada will experience a significant decline in living standards when they retire.
“A growing gap will leave close to six million Canadians facing a more than 20% drop in living standards as they leave the workforce, even accounting for the savings on some expenditures that retirement brings. If left unchecked, current trends in pensions, government programs and savings rates will, particularly for younger cohorts, be insufficient to allow today’s working Canadians to realize the retirement lifestyle that their elders have achieved.”
CIBC World Markets Inc., “Canadians’ Retirement Future: Mind the Gap,” 2013.
Canada Pension Plan (CPP) Enhancement
The original intent of the CPP was to give workers a basic and predictable level of income in retirement. Its unique features make it an attractive vehicle to
strengthen the retirement income system.
Unique Features of the CPP The CPP:
provides a secure and predictable defined benefit pension to virtually all working Canadians;
offers benefits that are fully indexed to inflation;
does not carry the risk of bankruptcy or insolvency of the employer;
is fully portable across Canada, supporting a modern and mobile labour force; and
has very low administrative costs as a share of plan expenditures compared to most employment pension plans.
Ontario will continue to take a leadership role to advocate for a modest
enhancement to the CPP. Ontario looks forward to working with other provinces and the federal government to agree on a plan to introduce a modest, fully funded enhancement to the CPP. See Chapter III: Federal‐Provincial Relations for
additional details.
Pooled Registered Pension Plans (PRPPs)
Pooled registered pension plans are a new type of tax-advantaged individual retirement savings account. They are intended to make it easier to save for retirement by providing employees and self-employed individuals with a simple, low-cost savings vehicle that is professionally managed and portable.
Participation in a PRPP would be optional for employers or self-employed
individuals. These plans would be professionally managed by licensed third-party administrators, such as regulated financial institutions, and investments would be pooled to reduce costs and improve returns.
The government will be consulting with interested parties to determine how PRPPs should be implemented, before introducing legislation. It will be important to ensure, for example, that members are adequately protected and low-cost objectives are met.
Target Benefit Plans
The government will also develop a framework for single-employer target benefit plans — another innovative retirement income model.
Target benefit plans have the advantages of both fixed costs and professional asset management. Contributions are set at a level intended to provide a specified pension. If experience demonstrates the contributions are insufficient to fund the target benefit, pension benefits of retirees and active members are adjusted to ensure the plan remains sustainable.
Highlights
Ontario’s Path to Balance
The government is on track to eliminate the deficit by 2017–18 in a way that is both fiscally responsible and fair, while creating a more
prosperous Ontario.
The government is committed to reducing net debt‐to‐GDP to pre‐recession levels once it eliminates the deficit.
The deficit for 2012–13 is estimated to be $9.8 billion — a $5.0 billion improvement compared with the 2012 Budget forecast.
Commission on the Reform of Ontario’s Public Services
The government is moving forward with 60 per cent of the recommendations from the Commission on the Reform of Ontario’s Public Services and studying the rest.
Making Healthy Change Happen
The government will continue to move forward with its Action Plan for Health Care to transform the health care system, provide better value for money, improve patient care and manage the average annual rate of growth in health care spending to two per cent over the medium term.
The creation of 23 Health Links across the province will strengthen the coordination of care for high‐needs patients, helping to reduce unnecessary hospital visits and readmission rates.
The government is investing in more health care services in the community, including over $700 million by 2015–16, to continue to reduce wait times for home care and provide the people of Ontario with more options that are available closer to home.
Labour Relations and Pensions
All public‐sector partners will need to continue to work together to effectively manage compensation costs within Ontario’s existing fiscal framework, which includes no funding for incremental compensation increases for new collective agreements.
The government plans to establish a technical working group with expertise in the design, governance and transition issues related to a new pooled asset management entity. That entity will oversee pooled asset management for public‐sector pension plans.
Municipal Sector
The Province will continue to work with municipal representatives on the redesign of the Ontario Municipal Partnership Fund (OMPF) while phasing down the program to $500 million by 2016.
Grants and Tax Support
The government will create a technical panel to identify savings in business support and consolidate remaining programs into a Jobs and Prosperity Fund.
The government will review benefit and tax programs to ensure that they are fair and affordable.