News Room

Updates for Pensioners in Canada Pension Plan

Click the link below for updates on a number of CPP updates for pensioners, including:

  • Annual indexation
  • 2017 Tax statements
  • Do you have to pay income tax every year when you file your tax return?
  • Coordination of benefits with the Canada Pension Plan and Quebec Pension Plan
  • Marriage after retirement
  • Enrol now for direct deposit!
  • Important reminders
  • Contact information

Click here to open new tab with CPP updates …Facebooktwittergoogle_plusredditlinkedinmail

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Indexing rate – Retired members – Pension

The indexing rate for 2018 in Canada is 1.6%.

The indexing of public service pension plan benefits is governed by two pieces of legislation; the Public Service Superannuation Act (PSSA) and the Supplementary Retirement Benefits Act (SRBA).

Pension increases for retired members and their survivors are calculated each year using Consumer Price Index (CPI) data published by Statistics Canada. In accordance with the SRBA, the increase is based on a comparison of the twelve-month average of the monthly CPI for the year just ended, to the twelve-month average of the monthly CPI for the previous year. The SRBA specifies that the twelve-month period from October 1 to September 30 is to be used to calculate the increase payable the following January. The index used for the calculation is the CPI for Canada for all items (not seasonally adjusted).

Click HERE for new window with more information …Facebooktwittergoogle_plusredditlinkedinmail

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New Monies for Canadian Military Disability Plan

The Service Income Security Insurance Plan (SISIP), a long-term disability insurance plan for members of the Canadian military, is getting $622 million in new funding to backstop the plan’s deficit, according to budgetary numbers tabled this week in the House of Commons.

The SISIP has struggled with funding issues for years, especially as claims have increased greatly in recent years “largely owing to increased awareness and recognition of post-traumatic stress disorder and mental health,” according to the budgetary documents.

The care of veterans has become a political hot-topic of late as disabled vets struggle with financial burdens while pointing out that the government seems to have no problem taking care of other priorities. Last week, for example, during a town hall meeting, a vet who lost his legs in Afghanistan asked Prime Minister Trudeau why his government could come up with $10.5 million to pay for a settlement to Omar Khadr, who was in Afghanistan fighting against allied forces, and yet his government is fighting in court against vets who are seeking additional funds. Trudeau responded that the veterans are “asking for more than we are able to give right now.”


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When You Will Die …

Well, the problem has been solved. Canadian Business has a calculator that tells you how old you will be when you die. They ask things like height, weight, parents with heart disease, etc. For me, the answer was 79.6 years. I didn’t like that result, so I reduced my weight and got the same answer. I reduced my height and got the same answer. I changed a few other variables and got the same answer.

Hmmmmm. Something smells like Danish fish.

So I went to the Sun Life website calculator. They didn’t even bother with silly details like family members who had cardio vascular disease (as if that could matter!). I put in the same numbers as the Canadian Business calculator and got a better result! 85 years!

But I thought I could do better, so I went to a calculator offered by a medical doctor (many detailed questions) and got a much better result: 96 years!

So, I guess the moral of the story is that if you are planning for retirement, you shouldn’t really trust computer programmers. Or better yet, shop around and find a mortality calculator that you like!

Link to Canadian Business calculator …

Link to Sun Life calculator …

Link to Doctor’s calculator …


Of course, average life expectancy means that at the expected age, 50% of people with that life expectancy would be dead, and 50% would still be alive. And of course, the living 50% won’t all drop dead at that point in time. Many, in fact, will continue to live for quite some time. Actuaries tell us that a non-smoking male who reaches age 84 then has an average life expectancy of 92.5. And if he reaches 92.5, he has an average life expectancy of 96. And so on. So, maybe my plan of surfing in Hawaii during my 90’s is a good plan after all!

Here is a link for an interesting calculator that shows the average life expectancy in different decades going back nearly 200 years. Link to calculator …Facebooktwittergoogle_plusredditlinkedinmail

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Will Sears Fall Short of Pension Obligations?

Here is an amazing story.

First, Sears Canada closed on January 14, 2018 after sixty-five years of operations in Canada. 14,140 employees lost their jobs at Sears over the past year, and hundreds of retail locations were shut down. This of course represents a dramatic hollowing out of the Canadian retail landscape, following on similar closings of Target and Zellers in recent years.

What is happening to retail in Canada? Is it a coincidence that the newly anointed “richest man in the world” is Jeff Bezos, the found of and (the Canadian branch of Amazon). People still need to buy stuff for everyday living, but it appears that the rapid move to online shopping is taking down the retail giants one by one.

Note that these developments are ironic. Sears Canada was formed when Simpsons Sears bought out the storied Eaton’s retail chain in 1999. Eaton’s of course started in the late 19th century as a revolutionary catalog mail-order business in Canada, which is also how Sears started in the USA. Both brands eventually moved into retail and came to dominate their respective countries. It was only after a long successful run that Eaton’s surrendered to Sears in the Canadian market.

Then along comes Jeff Bezos and online shopping. What is online shopping if not a new version of a mail-order catalog? So, where Eaton’s and Sears put general stores out of business 100 years ago with their eye-catching catalogs featuring extensive selections and low prices and home delivery, now the modern mail-order catalog is doing the exact same thing to Eaton’s and Sears!

In the midst of this carnage, questions remain regarding the obligations of the Sears Canada pension plan. News reports on and other outlets have reported that the pension plan is underfunded by hundreds of millions of dollars and that retirees may be shortchanged nearly 20% on their monthly pension payments for the rest of their lives. People are in an uproar, because Sears Canada allocated over half-a-billion dollars in dividend payments to shareholders in the past five years.

Looks like a corporate rip-off by greedy shareholders!

Actually, the truth beyond the headlines isn’t nearly so exciting.

First, Sears Canada is still in the process of selling off assets in bankruptcy, so the pension shortfall will probably get a chunk of those funds to top up to solvency.

Second, it appears that the pension shortfall is NOT the $266 million reported by the CBC and others. That total amount covers some group life and health funding obligations, but the Defined Benefit pension obligation is more in the $110 million range. Still a lot, but representing just 10% of the pension plan’s total obligations. So, even if the asset sales did not make the pension plan whole, members would still only lose perhaps 10% of their pension payments, rather than the 19% number trumpeted in the press.

Next, it appears that the Sears Canada board of directors did NOT rip off the pension plan by paying dividends to shareholders. Yes, the pension plan was in deficit at the time (as were many DB pension plans after the 2007-8 financial crisis), but it was paying down its obligations according to a schedule agreed to by the pension regulator (The Financial Services Commission of Ontario). Sears Canada was a viable, profitable business (“going concern”) when it paid out the dividends in question. The problem with Sears Canada was that their business strategy over the past 2-3 years did not work out and they started burning through significant cash, which is what forced the bankruptcy. There was no way they could foresee this result five years ago when they paid some dividends out of a healthy, profitable business with very little debt. Yes, bad things sometimes happen to businesses, and sometimes pension plan retirees get stuck holding the bag. But in this case, the story behind the headlines is not nearly as nefarious as the headline writers would have you believe.

Here is a link to the original CBC story.

Here is a link to a blog post on Sunday by Eddie Lampert, the Sears shareholder who gets skewered in the CBC article.Facebooktwittergoogle_plusredditlinkedinmail

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Ontario’s Pension Benefit Act Amended to Impose Administrative Monetary Penalties Effective January 1, 2018

Ontario’s Pension Benefit Act (PBA) was amended to give the Superintendent of Financial Services the authority to impose Administrative Monetary Penalties for breaches of the PBA.

In September 2017, the Ontario government finalized the amendment to Regulation 909 under the PBA to come into force effective January 1, 2018. The new administrative penalties suggest the importance of regulatory compliance in Ontario for plan sponsors, administrators and third-party providers.

The Superintendent shall levy a general or summary administrative penalty on a person (such as the plan sponsor or plan administrator).  General Administrative Penalties are imposed on more severe violations of the PBA, such as failure to administer a plan in accordance to its plan document.  Summary Administrative Penalties are imposed on more procedural violations, such as late filings of the Annual Information Return. Both general and summary administrative penalties are subject to maximum penalty limits of $10,000 against a person/individual, and $25,000 against a corporation or other legal entity. Administrative penalties cannot be paid from the pension fund.

In order for the Superintendent to impose the penalty, there are a number of safeguards that must be considered, which are dependent on the type of penalty. General administrative penalties require the Superintendent to give notice of the intention to levy the administrative monetary penalty, allowing the person 15 days to request a hearing. Summary administrative penalties require the Superintendent to issue the order allowing the person 15 days to appeal.

With the Administrative Monetary Penalty provision coming January 1, 2018, pension plan sponsors, administrators and third-party providers should do what they can to prepare for the new regime. Those involved in pension plan administration should ensure they understand the new regime, confirm that compliance and procedures are in accordance to the PBA, be aware of filing deadlines, and review third party contracts regarding liability for errors.

For additional information on Administrative Monetary Penalties, please visit FSCO’s website.



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2018 YMPE Announced

On November 1st, Canada Revenue Agency announced that the maximum pensionable earnings for 2018 will be $55,900, up from $55,300 in 2017.

Contributors who earn more than $55,900 in 2018 are not required or permitted to make additional contributions to the Canada Pension Plan.

The basic exemption amount for 2018 remains $3,500.

The 2018 contribution rate for employees and employers remain unchanged at 4.95%.

The 2018 contribution rate for self-employed will also remain unchanged at 9.9%.

The 2018 maximum employer and employee contribution to the plan will be $2,593.80, up from $2,564.10 in 2017.

The 2018 maximum self-employed contribution will be $5,187.60, up from $5,128.20 in 2017.

Check out our website for a breakdown of these rates and others.


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Nigerian Pension Reform Success Story

In 2005, Penad had a small part to play in the major pension reform announced in Nigeria in 2003.

The Nigerian government set up a national contributory pension scheme to ensure that all Nigerians had the opportunity to save for retirement and build pension accounts. The basic structure was outside the previous Nigeria Social Insurance Trust Fund, which was not adequately meeting the needs of citizens. The new CPS (Contributory Pension Scheme) mandated that all companies with five or more employees must enroll their workers in the scheme, and people who worked for smaller employers also had the option to join.

Upon joining, a plan member would choose an administrator from several available and would then be set up with a retirement savings account. This account would be off-limits until retirement, at which point members could draw a pension based on their contributions.

Penad’s role in all of this was to act as an advisor to a group setting up one of the administration companies. Our CEO Frank Price and our President Louise Price traveled to Lagos for meetings and to present a keynote at a conference.

Cover image from Penad’s Signature magazine after conference in Lagos.

Today, thirteen years later, the Nigerian experiment is a big success. Over 7.4 million people from 200,000 companies have joined the CPS, and pension fund assets have grown to over N6.4 trillion, with N30 billion in monthly contributions flowing into the scheme. Over 184,000 people have already retired under the plan and are drawing out pension.

A detailed summary is available here: Overview of Nigerian Pension Scheme Stats








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Would You Rather Own 31% of a Success or 81% of a Flop? Bombardier’s Story

Donald Trump promised to put American workers and companies first, but now it appears he has created a monster new competitor for one of America’s leading firms — Boeing.

It was announced today that Canada’s Bombardier and Europe’s Airbus (both Boeing competitors) have agreed to join hands in a strategic alliance to manufacture, market, and support Bombardier’s C Series jets, a move the Wall Street Journal is saying “could be the biggest shake-up of the commercial jetliner business in 30 years”.

Airbus will acquire 50.1% of the C Series line, while Bombardier retains 31% and the Quebec government, which invested heavily in Bombardier, gets the rest. This is a win for Bombardier as they have been struggling to sell the C Series due to the company’s shaky financial state, and Airbus gets control of one of the most exciting new air-frames for the medium range market, which will basically blow Boeing’s 737 out of the water.

Driving the deal is the fact that Airbus has manufacturing capacity in the USA, which will allow the C Series to be manufactured in America for American clients, thereby circumventing the proposed punitive duties recently announced by the Trump administration.

Will this not create jobs in America, a prime directive of the Trump platform? Yes, but in fact something like 50% of the C Series jobs were in the USA in any event due to the transnational nature of the Bombardier supply chain (the engines for the C Series are made in USA). So, Americans may or may not gain a few jobs working for Airbus, but these will presumably be greatly offset if the C Series becomes a big success at the expense of Boeing, as seems more likely now. Boeing will sell far fewer 737s if the Airbus C Series becomes a big hit.

Will this “make America great again”? We will have to wait and see. Bombardier has 350 orders for the C Series but sales slipped in the past year due to uncertainty if the company would survive. Now that Airbus effectively owns the C Series, airlines around the world can step up and place orders, knowing the product will be supported by one of the largest aircraft manufacturers in the world. Bombardier is hoping to sell 3,500 C Series jets in the coming 20 years.

For a head-to-head comparison of the C Series and the 737, click this link from Forbes: Compare C Series and 737

Business Insider has a great overview of Boeing’s folly here: Business Insider on how Boeing Screwed Up

Bombardier has not said how this move will affect jobs or workers’ pensions in Canada, but Airbus has agreed that all C Series planes not destined for the US market will continue to be made in Canada. Presumably Bombardier stakeholders will benefit, especially if Airbus is successful in pushing C Series sales to a whole new level. Bombardier did the hard work of creating the prototype and bringing it to market; now Airbus can bring it to a full market roll out. This looks like a win/win for both companies, and a big lose/lose for Boeing. They will not only sell fewer 737s in America, they will also face a much stronger competitor worldwide.


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Expanded Canada Pension Plan Benefits Who, Exactly?

Robert Brown, a fellow with the Canadian Institute of Actuaries, wonders in this post (see link below) how the recent expansion to the Canada Pension Plan will impact various levels of beneficiaries.

One would expect, based on the press and government messaging at the time, that dramatically increasing benefits would benefit everyone (a rising tide lifts all boats, after all).

Not in this case, it appears. The lower income Canadians will basically see little benefit and in fact might even do worse under the new formula. Here is the article (click to open):

Robert Brown: Low-income workers may lose from expanded Canada Pension Plan


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