October 30, 2021

Canada's pension system is simply not doing the job, authors say

Political issues deemed too important or sensitive to be tampered with are often referred to as the 'third rail' after the electrically-charged third rail in subway systems ... like Canada's pension system, for instance. 

9780771046636“Many Canadians will be surprised by how much they will need to save to fund their desired income in retirement and that their income is going to plummet,” says Jim Leech, co-author of The Third Rail: Confronting our Pension Failures

“It’s clear that existing pension structures are not allowing people to reach their saving goals. Political leadership is urgently required to bring a more flexible approach to retirement planning, one that can withstand the pressures of more retirees and longer life expectancy.”

The easiest and most efficient way to close this shortfall is to enhance the Canada Pension Plan, he maintains. But that's not likely to happen anytime soon, since most workers and their employers are simply too short sighted. 

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September 26, 2021

One in five Canadians expect they'll be working forever: report

Today's retirement challenge? Too much life, not enough savings.

So much so, that nearly one in five Canadian workers (17%) are fairly sure they'll never be able to afford to retire fully, according to study released by global bank HSBC.

Among the 15 countries surveyed, Canada had one of the largest proportions of workers who feel this way, followed closely by the United Kingdom (19%) and United States (18%).

Of those who are divorced or separated, the number jumps to 24% -- another indicator that so-called grey divorces, where a growing number of people are ending their marriages in their later years -- continue to crimp retirement plans.

Late-in-life divorce means that there's much less time to rebuild retirement assets and the numbers are startling.

The divorce rate among middle-aged and older adults has doubled during the past two decades, and the rate was 2.5 times higher for remarriages than for first marriages, according to figures from the National Center for Family & Marriage.

 Whereas if you were younger, in your 30s or 40s and you’re involved in a divorce and division of assets, there is still some time left to rebuild those assets,” she said.

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September 18, 2021

Government trims benefits for retired public servants

Hands off our benefits!

That’s the rallying cry being heard among retired public servants worried that the federal government is going to make good on its threat to reduce some of their retirement benefits

In its last budget, the government did announce that it intended to review retirees’ benefits, including pensions, health and dental care, and life insurance. And it's making good on its promise.

At issue right now is Treasury Board’s proposal to double the premiums that retired public servants pay for the public service health care plan while also limiting their eligibility to join the plan.

The government wants retirees to pick up half of the cost of contributions to the heavily subsidized health plan rather than the 25% they pay now. It also wants that the minimum years of service required to join to be extended to 10 years from the current two.

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September 05, 2021

Longer life expectancy poses threat to pension plans: report

New figures confirm that life expectancy in Canada has increased — a trend that poses a threat for pension plan sponsors and, ultimately, for plan members.

According to updated mortality tables recently released by the Canadian Institute of Actuaries, the life expectancy of a 60-year-old male today has increased by 2.9 years — from 24.4 to 27.3 years — compared to pension mortality tables currently in use.

The life expectancy of a 60-year-old woman has increased by 2.7 years — from 26.7 to 29.4 years.

All of which is good news, of course, unless you're the one who has to figure out how to pay for those extra golden years.

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September 03, 2021

Common law spouses not necessarily entitled to pension benefits

A recent court decision has created new worries for the 'married but not yet divorced' set.

The case in question involved a man who died prior to retirement, leaving behind both his long-time common law spouse, with whom he was living at the time of his death, and his first wife, to whom he was still legally married even though they lived apart.

The question was who should receive the man’s pension death benefit: his common law wife, his legal spouse or his designated beneficiaries?

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July 15, 2021

Canada needs to get it right on pension reforms

Policy-makers must start thinking "outside the box" to ensure Canada and Quebec Pension Plan (CPP/QPP) reforms will address projected gaps in future retirement income.

A new study from the Institute for Research on Public Policy (IRPP) reveals that these new reforms, as they stand, will be of little help to the next wave of Canadian retirees.

Michael Wolfson, former chief statistician, Statistics Canada, examines the impact of various options for CPP/QPP in the study Not-So-Modest Options for Expanding the CPP/QPP.

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July 09, 2021

Politicians' gold-plated pension plans need further trimming: report

Gold-plated pensions for British MPs could be scrapped under an overhaul of parliamentarians’ pay.

Pensions and juicy severance packages paid to ousted politicians have been branded a reminder of the ‘old, cushioned world of privilege’ by Sir Ian Kennedy, the chairman of the Independent Parliamentary Standards Authority.

The watchdog is expected to unveil a scaling back of the ‘excessively generous’ pensions entitlements and golden goodbyes that many MPs enjoy as part of IPSA’s review of pay and expenses.

Might Canada be considering the same sort of move? They certainly should, maintains Gregory Thomas, federal director of the Canadian Taxpayers Federation.

Many federal politicians who decide to retire at the next election could easily walk away with millions of dollars from the lucrative parliamentary pension plan. And the CTF thinks that stinks.

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July 08, 2021

When it comes to finances, not all boomers are in the same boat

There's a big difference between still being in your 50s and having said goodbye to 60 -- particularly when it comes to money.

Although often lumped together under the same category, subsets of the boomer cohort have led fairly different lives, have diverging priorities and subsequently varying levels of retirement preparedness, according to a recent report by the Insured Retirement Institute.

The biggest differences between early (mid-60s) and late (mid-50s) boomers has been the migration from the defined benefit pension plan (DB) to the defined contribution (DC) plan that has left many of those not yet retired on their own when it comes to investing.

The 'it's all yours, buddy' plans that many late boomers are relying on present them with a unique challenge when compared with the secure income plans their older siblings are living off of.

For this reason, late boomers may want to look into annuities in order to provide them with a guaranteed source of income throughout their years in retirement, the report states.

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June 05, 2021

Workers losing ground when it comes to planning for retirement

Not a week goes by, it seems, when someone doesn't produce a new report noting just about everyone's lack of preparedness for life after work. And it's not just those nearing retirement who should be worried.

Research from Prudential Financial shows that one quarter of Millennials (those between 21 and 29) feel that they won't be able to stop working until they are over 70, largely because they can't see how they'll ever save enough money.

The gap between what workers realize they should be doing to prepare for retirtement and what they're actually doing can be largely attributed to a lack of motivation, Prudential suggests.

And that's where employers can help.

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May 27, 2021

New proposals continue to shrink public sector pensions

In case you missed it, last week marked the most recent skirmish in a much larger battle to bring burgeoning public-sector compensation costs under control.

The Ontario Municipal Employees Retirement System (OMERS), the largest pension fund in Ontario , is studying a change that would reduce the key figure used to calculate how much money an employee will receive each year in retirement.

The proposal would reduce the “multiplier” rate now used to calculate when workers would be entitled to full benefit to 1.85% from 2%. Other potential changes include curbs on indexing for inflation and a delay in early-retirement eligibility.

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Gordon PowersGordon Powers

A long-time fund company executive, Gordon Powers now heads up the Affinity Group, a financial services consulting firm. Gordon was a personal finance columnist for the Globe & Mail for many years, has taught retirement planning...