I want to feel comfortable about retirement, but … is my pension safe?

With the financial turmoil of the past 18 months and media coverage of pension plans which have gone or are going bust, many Canadians are wondering about their own safety net.

The Canada Pension Plan – Good News
Every three years the Canadian Pension Board completes a review of the Canada Pension Plan (CPP) and the retirement income system. In May of this year the federal, provincial and territorial Ministers of Finance announced while the plan’s assets were affected by the economic downturn the CPP remains strong. Any assets that were affected are not needed to pay benefits for at least another decade, by that time, it is fully expected that the investment income will be replaced.

There were lessons to be learned from the downturn and recommendations to modernize the CPP are being made. Four key areas are to be modernized and the proposed changes will be gradually phased in, starting in 2011.

• Employees can now continue to work while collecting their CPP.
  
• If collecting CPP prior to age 65 workers and their employers, will be required to contribute to CPP, which will thereby increase their CPP beneft. Pensioners who continue to work past 65 may elect to make CPP contributions. If they do so, their employer will be required to make contributions.
  
• Monthly pension adjustment rates for early and late retirement will be adjusted to fair market values. The reduction percentage for early retirement will increase from 0.5% per month up to 0.6%, while the increase percentage for late retirement will change from 0.5% to 0.7%. These changes will be phased in starting 2011 (early retirement) and 2012 (late retirement).
  
• Increase in general low earning drop-out from 15% to 16% in 2012 and 17% in 2014.

Since the changes will not start being phased in until 2011, anyone currently receiving benefits, or who plan to start receiving benefits prior to 2011, will be under the current set of rules

Employee Pension Plans
Like the CPP, both Ontario government pension plans (the OPSEU Pension Plan, which provides pensions to OPSEU members and the Public Service Pension Plan [PSPP] which provides pensions to all other Ontario government employees) suffered losses in 2008. For more information on the pension plan to which you belong check out the Annual Reports of the OPSEU Pension Trust (administrator of the OPSEU Pension Plan) at www.optrust.com or the Ontario Pension Board (administrator of the PSPP) at www.opb.ca. For a review of how to read your pension statement check out the back page of our February 2008 newsletter. If you have a pension plan from another employer talk to your Human Resources professional to find out how the economic downturn has affected their plan and what it means to you.

Understanding your pension benefits is key to improving and maintaining your Financial Strength. If you have never taken the Financial Strength test or it has been a while it’s time. Getting a handle on your Financial Strength now will put you in an excellent position to maximize any RRSP contributions for the 2009 tax year. Come in and see us – we want to C.U. so we can help you build on your financial strength.