The Debt of Ontario’s Pension Plan
Changing legislation provincially as oppose to federal legislation and how hiccups in Parliament change economic planning.Accountability for taxpayer’s dollars after a failed pension plan aimed at compensation for Ontarians.
Key Words: Pensions, Liberal government, debt, Canadian Pension Plan, Ontario Retirement Pension Plan, retirement benefits, baby boomers, generation X, millennials.
Amid the hailstorm of criticism towards liberal premier Kathleen Wynne a new policy has failed to gain momentum under Wynne’s government — and this time it has cost Ontarians $70 million from a scrapped pension plan. As a result, Ontario will see a loss of millions of taxpayer dollars from the aborted plan that aimed to extend the outreach of the Canadian Pension Plan (CPP). Naturally, the loss does not occur overnight, nor are Canadian’s pensions doomed to failure.
The Two Pension Plans
In 2014, Wynne announced an extension of the federally regulated CPP called the Ontario Retirement Pension Plan (ORPP). In 2014, the CPP was seen as inadequate at reaching its target goals, thus the introduction of the ORPP to strengthen the CPP. The difference between the two pensions are in the concentration of money towards retirement and future pensions.
The province-wide CPP proves an individual or their immediate family a minimum ‘partial replacement’ of earnings in the case of retirement, disability or death of a Canadian citizen above the age of 18 regardless of status, employment, or insurance. The ORPP, however, aimed at filling in a gap left from the CPP’s payments and Canadian’s requirements for living after retirement, stating that some Canadians cannot sustain themselves on such a low amount of pension payments. Essentially, not enough Canadians are saving for the cost of living in retirement. The ORPP was created to fill this gap for Ontarians, instead of strengthening the current CPP program.
Below is an estimation of the basic mechanism of Wynne’s now failed Ontario retirement pension plan.
Annual Retirement Benefits under the ORPP
Example 1: “Barbara”
Salary — Contributions — Employer — Contributions — Retirement Benefits
$45,000 — $2.16 / day — $2.16 / day — $6,410 / year for life
Source: [link]
Focusing on Ontario
It should be noted that Wynne and her government chose to solve the federal government’s pension plans shortcomings from a narrow approach when they decided to create the ORPP. The federal government regulates the Canadian Pension Plan which extends to all the provinces and territories. Still, some employees are not a part of the CPP because their workplace does not provide it. It is interesting to note that the CPP claims to offer its pension to “practically everyone”, showing some discrepancies in the legitimacy of the CPP’s claims. The Canadian pension has flaws, and is unable to compensate all workers or retirees, and even then, some people are grossly undercompensated and live on low annual pension incomes. Wynne’s ORPP was proposed to address the CPP’s shortcomings, mainly towards the CPP workers without adequate workplace pensions. Even if the pension did not fall through, the inadequacy of the CPP would only have been filled for Ontarians.
Moving On
The fate of the ORPP for Wynne has been sealed. But why did the program cost Canadians 70 million? Some sources claim that Wynne and her team were payed millions before the project even took off. The marketing team and administration already received a hefty salary, and once paid, the money could not be “handed back over”. Sources claim that the money was spent on research, launching the program, and administration who were hired to run the pension plan.
This begs the question; who should pay for a government program that fails? As students and young workers it is worth acknowledging that the retrospective consequences will fall onto the young adults of today as more people fall into old age with the baby boomers in their retirement years. In a way this is the irony of Wynne’s failed pension plan; both the baby boomers, generation X and millennials feel a loss from the Ontario liberal’s current pension failure.
Additional Readings:
AN: “Additional readings” are not directly sourced or referred to in the following article, but may shed further insight upon the topic at hand.
O’Leary, Kevin. Open letter to Ontario Premier Kathleen Wynne, Part 2.
McNish, Jacquie. The problem with pensions: symptoms and cures.
Smith, Susan. Canada’s pension safety net is strong but showing strains.
Chilton, David. The Wealthy Barber Returns. Print. — Nods at strategies and provides outlines for savings into retirement and beyond independent of a pension plan.
Wesley, Jared J. Big Worlds: Politics and Elections in the Canadian Provinces and Territories. Print. — Analysis between discrepancies in policy and voting behavior between states.
