Ontario launches consultations on new pension plan

TORONTO – Ontario’s Liberal government is looking for public feedback on its plan to create a provincial pension plan with mandatory contributions from workers and employers.

The government released a consultation paper on “key design questions” such as a minimum income threshold — the $3,500 used by the Canada Pension Plan is suggested — and on exactly who would be eligible for the provincial plan.

Associate Finance Minister Mitzie Hunter says about two-thirds of Ontario workers do not have a workplace pension, so virtually all of them would be required to join the Ontario Retirement Pension Plan.

The government will phase-in mandatory 1.9 per cent contributions from employers and workers over two years, starting with larger companies in 2017 before moving on to smaller operations like convenience stores and dry cleaners.

Business groups like the Ontario Chamber of Commerce say requiring workers to pay up to $1,643 a year for a provincial pension — and forcing their employers to match those contributions — will drive up costs and result in fewer jobs.

Hunter countered by saying the introduction of the ORPP on Jan. 1 2017 coincides with the expected reduction in Employment Insurance premiums by the federal government.

Ontario wants to mirror the CPP as much as possible, and still would prefer to enhance the CPP instead of creating its own provincial plan, said Hunter.

“There was consensus among the provinces to expand the CPP, but the federal government unilaterally shut down those conversations,” she said.

Hunter could not say when the ORPP would start paying benefits to retirees.

“We estimate that about three million people will be contributing to the plan, about $3.5 billion in funds that will be invested each year,” she said. “In terms of when the benefits will be made available, those details have not been decided.”

Experts recommend people aim to replace 50 to 70 per cent of their pre-retirement income to maintain a similar standard of living once they stop working, but Hunter doubts very many people have managed to put aside enough savings.

“We know that there is a retirement savings gap, and we know there is low pension coverage at work,” she said. “We want to ensure that Ontarians, when they retire that they have some security that they can rely on.”

The province also wants to hear from the self-employed, who are ineligible for the ORPP because of the federal Income Tax Act, about ways to improve their retirement savings.

“What we’ve committed to is to consult with the self-employed, exploring ways of supporting them in retirement,” said Hunter. “We introduced just last week pooled retirement pension plan, which is another option for the self-employed.

The province said ORPP contributions would be ‘locked-in’ just like CPP contributions, prohibiting people from cashing them out before retirement.