June 22, 2021

New pension rules on marriage breakdown offer relief

With the value of a pension representing the largest store of wealth for many families, Ontario’s new rules for dividing pension assets when marriages fail are welcome news.

Pen Despite separation agreements or court orders, the current rules don’t allow money to be transferred to the ex-spouse unless the member has already left the plan, through termination, death or retirement.

Now, once the rules kick in, the value of the pension can be settled immediately even though the plan member is still working.

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May 31, 2021

Two important keys to retirement security

Are you worried what retirement is going to look like? Wondering if you'll be better off than your parents?

Ratio If you’re over age 50 and concerned about the future, consider making two changes that could significantly improve your odds of retiring, says Charles Farrell, author of Your Money Ratios: 8 Simple Tools for Financial Security.

If you combine working a little longer with some modest reductions in your retirement lifestyle, you can vastly improve your retirement picture, he suggests. 

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May 17, 2021

Disgruntled teachers fight for increased pensions

Compared to most Canadians, Ontario’s teachers enjoy one of the richest pension plans in the country. Longtime teachers, who now contribute an average of 11% of salary towards their pension, can expect to receive about two thirds of what they were making over their last few years of work once they leave the classroom.

Teach But, according to a group of disgruntled retired teachers, along with their widows and widowers, the Ontario Teachers’ Pension Plan isn’t playing fair when it comes to determining how much of this money the spouses of dead plan members should receive.

At issue is OTPP's practice of denying full survivor pensions to those who marry after they retire. Under the current rules, spouses who come along after the plan member retires are entitled to only 10 years of benefits.

If pensioners who marry after retirement want to provide a longer-lasting benefit, they must take a pension cut to obtain a survivors pension for their spouse. The reduced pension is permanent, even if the pensioner outlives their late-in-life spouse. 

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April 11, 2021

DB pension plans soon a thing of the past: report

A continuing shift in pension plan funding is driving more employers to rethink their pension plan structures, forcing employees to shoulder more risk in the process.

Pen Contract work, career changes and a longer, more active retirement have changed what Canadians need from a pension. And, increasingly, they’re on their own when it comes to funding their days after work.

Faced with having to pump more money into plans or decrease the benefits, companies of all sizes are increasingly moving workers away from guaranteed defined benefit (DB) pension plans into open-ended defined contribution (DC) plans.

51 per cent of Canadian companies have already converted to DC plans for current employees or new hires, up from 42 per cent in 2008, according to a recent review by Towers Watson. And a further 9 per cent plan to convert this year.

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March 17, 2022

Inflation level really not as high as it seems: Report

For many Canadians, higher inflation is a foregone conclusion. It’s no longer a matter of if we will experience it, but how soon it will be here.

Images And if consumers truly believe prices will be higher in the future, they should be out buying goods today. After all, why wait for higher prices?

But what if, as a recent C.D. Howe Institute paper argues, Canada's inflation is actually quite a bit less than advertised?

According to McGill University economist Christopher Ragan, the way Statistics Canada measures changes to the cost of living regularly causes to overstate inflation.

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March 15, 2022

New divorce rules for splitting pension assets

When a couple is divorcing, things are generally split down the middle. The person with the more substantial net worth generally pays half the difference to the other person. This is known as equalization of family assets, the largest of which, other than the family home, is often a pension plan.

Pension plans are the trickiest assets to divide, however, both because they’re not valued in terms of a current balance the way RRSP accounts are, and because they generally can't be liquidated prior to retirement age.

This can lead to more conflict since most parties typically want to settle all of their marital property issues as soon as possible so they can simply get on with their lives.

But all this is finally changing.

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March 14, 2022

British public sector workers face smaller pensions

And you thought Wisconsin's governor Scott Walker was determied to gut public service unions.

If Sir John Hutton gets his way, British public sector workers could pay more for their pensions, receive lower payouts and have to work much longer before retirement.

Hutton’s main recommendation, carried over from an interim report last summer, is that the final salary link for public sector pensions should be replaced with new schemes which calculate pensions on a "career average" – the norm in many Canadian pension plans which generally take an average of your last five years on the job.

Although accrued pension benefits in the existing schemes would be fully protected, this would still mean lower pensions for the majority of workers and could mean cuts of up to 40% for higher earners.

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March 07, 2022

Will unisex pricing soon hit the annuity market?

Last week in this space we talked about the European Court of Justice ruling that insurance companies must stop charging different rates for women and men by the end of next year.

RetireCanada allows insurers to take gender into account when pricing life-insurance products, though the rules for auto insurance vary across the country.

But, it’s not just insurance rates that might be affected. In fact, the unintended consequences of this judgement are already starting to emerge as older EU consumers try to determine what these changes might mean for them.

Men coming up to retirement, for instance, may consider moving their after-work plans up a bit to get a better annuity deal before the lower unisex rates are introduced.

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February 15, 2022

Canadians want flexibility when it comes to retirement income

Canadians have been bombarded with advice about how to save for retirement but, until recently, they’ve been left on their own when it comes time to tap their nest eggs.

Retire That’s why products offering the prospect of a guaranteed income in retirement have gained massive appeal, particularly in the aftermath of the most recent financial crisis.

Nonetheless, it appears that most of us want the best of both worlds when it comes to retirement income planning – a guaranteed income stream and the flexibility to access funds whenever they choose.

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November 24, 2021

Public service pension shortfall tops $65 billion: C.D. Howe

As the first wave of baby boomers heads to retirement, the nation is dividing into two classes of workers: those who have public service pensions and those who don't.

Money Retired government workers are twice as likely to get a pension as their counterparts in the private sector, and the typical benefit is far more generous, according to a recent C.D. Howe Institute report.

At present, pension-plan members account for a third of total contributions on average whereas the government — through the taxpayer ­— makes up the rest.

Backing promises to public service workers, the RCMP and Canadian Forces would actually require contribution rates of 35, 41, and 42 per cent of pay respectively, the report declares.

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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...

Jason BucklandJason Buckland

The modern-day MC Hammer of money, Jason can often be seen spending cash that isn’t his with the efficiency of a Wilt Chamberlain first date. After cutting his teeth as a reporter for the Toronto Sun, he joined the MSN Money team with...