New Federal Pension Plan

[Big Guy]

The “Target Benefit Plan” (voluntary), would be available to Crown corporations and to all federally regulated private sector companies, which include those in Canada’s transportation, banking and telecommunications sectors. It would have the effect of watering down the existing defined-benefit plans that many employees of such companies currently have. It could encourage employers with defined-benefit plans to adopt something that costs employees more and offers them less while taking more risk.

The new plan, however, could also improve benefits for employees who don’t have a defined-benefit plan. The intention of the new option would be to strike a balance between the guaranteed payments in retirement that come from a traditional defined-benefit pension and the increasingly common defined-contribution plans, in which the payout in retirement is entirely dependent on the success of an individual’s investments.

Many private sector companies are moving away from defined-benefit plans because they require them to cover shortfalls if investment returns fail to meet expectations. In the case of Crown corporations such as Canada Post, taxpayers would be responsible for underfunded pension plans.

Under target benefit pensions, employers and employees jointly manage a plan aimed at collecting defined contributions to achieve a specific benefit in retirement. However, if returns are lower than expected, employers are not obligated to top up the fund. Instead, the employer-employee fund managing group could reduce benefits, increase contributions or both. Similarly, if investments overperform, benefits could be increased or contributions reduced.

The goal is to encourage more employers to offer pensions and to entice those with defined-contribution plans to offer something better. Ottawa’s proposal would not affect the core federal public service.

How is this going to affect the proposed Ontario plan especially since Minister of State for Finance Kevin Sorenson has described the Ontario plan as a “reckless scheme”?

Is this federal “Target Pension Plan” a good idea or a bad idea?

[Argus]

About 60% of Canadians do not have a pension plan, other than CPP. And Canadians are living longer. Something has to be done or lots of them will wind up on the public dole.

I just don't think this is the best idea. I would much prefer increasing both contributions and payouts under the CPP.

[Keepitsimple]

Ontario's "proposal" is nothing more than a smokescreen to turn the channel from their scandals and hoodwink the gullible into thinking they really "care" about the older generation - which typically might vote Conservative. The McGuinty/Wynne bunch would never move forward with such a complicated initiative and if they did - after eHealth, Ornge, Green Energy and Gas Plants - what would Ontarians have to look forward to? A disgraceful, pre-election tactic in a "damn the torpedoes" effort to cling to power.

Edited April 24, 2014 by Keepitsimple

[Keepitsimple]

The goal is to encourage more employers to offer pensions and to entice those with defined-contribution plans to offer something better. Ottawa’s proposal would not affect the core federal public service.

If that's the goal, then I'm all for it. Right now, it sounds like it's all broad strokes but it's a very worthy initiative.

[Topaz]

An expert on pensions on CBC, talk about this idea and he said out of the 1200 government pensions only 400 qualify for the Tories idea and that increasing CPP to $500, making the top 1500.00 monthly would be a better idea. The Tories said no to the increase because they say it would harm employers, which many are in the House, (conflict of Interest) maybe. One item in the increase to CPP, is they would have to bring in a new law that says companies and unions can not grandfather CPP or OAS in their settlements because many Canadians are dealing with this now in their retirement.

[Topaz]

Can one trust a government that brings changes to pensions that will affect hundreds but doesn't touch their own???

[Guest]

Can one trust a government that brings changes to pensions that will affect hundreds but doesn't touch their own???

Can one trust a government?