Direct Deposit for Retirees Abroad

Thinking of retiring outside Canada and liking the idea of your Canada Pension Plan pension payment deposited directly into your bank account? Get it done easy! Send a written request to the Pension Centre (LINK BELOW) with a void cheque or a document with the IBAN/NUBAN/CLABE number (or bank sort code) and your bank account number. The link below will also take you to a list of participating countries.

Click HERE for link to Pension Centre …


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Marriage after retirement

If you are a retired member  of the Canada Pension Plan or Quebec Pension Plan and marry after retirement, your spouse is NOT entitled to a survivor pension in the event of your death. However, you may choose to provide your spouse with a pension at the time of your death, by having your pension reduced. You must apply for this option within one year from the date of your marriage or one year from the date your pension starts, whichever is later.Facebooktwitterredditlinkedinmail

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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 …Facebooktwitterredditlinkedinmail

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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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OHIP Plus May be a Negative

OHIP+ has a great premise, but the devil may be in the details.

The program was created so that children and young people under age 25 get free prescription meds. As good as the universal program is in Canada, one area of concern has always been access to medications. A person who needs medical attention gets free access to doctors, emergency rooms, hospital stays, surgery, cancer treatments, etc. Also, when they are in the hospital, their medications are provided. However, as soon as they go home, they need to pay for their own meds (with some exceptions), which some people are unable to do. So, you get the best doctors in the best facilities, but once you leave the doctor’s office, you are on your own.

Until OHIP+ came along in Ontario, that is. Finally kids are covered in Canada’s largest province.

Seems great, right?

Not so fast.

It turns out that the program has two very serious issues that is actually interfering with the healthcare of young people.

First, if a family has a personal supplementary health insurance plan (to top up the things the universal health system does not cover), then they will very likely have difficulties with OHIP+ coverage. If they have a child who needs regular medication, their personal health insurance will no longer cover that medication. The insurers now tell them to get their meds through OHIP+. But OHIP+ may not cover the specific medication that the doctor has been prescribing. OHIP+ has a list of 4,000 or so approved medications, and they release approval to use some of these drugs in order, from cheapest to most expensive. So, if your doctor prescribes a medication, you are required to try the cheapest drugs first to see if those work. If not, OHIP+ will move you up to the more costly drugs.

Consider what that means for a child who is currently being successfully treated with one of the “more expensive” drugs. OHIP+ now requires them to stop taking that drug, thereby risking making them sick (or sicker), in order to experiment on their bodies with a cheaper alternative. If that cheaper alternative does not work, then they can go back to the more expensive drug.

OHIP+ is doing this, despite warnings from physicians that the care of patients is being put at risk. If a doctor prescribes Medication A and knows that it works, OHIP+ is second-guessing the doctor and forcing them to experiment with Medications X, Y, and perhaps Z, to save money. If those don’t work, then the patient can go back to Med A.

As you can imagine, parents are not pleased. Neither are doctors.

For parents, they simply don’t want to put their children at risk of trying different drugs when the current ones are working. They also don’t understand why their personal insurance companies will no longer cover the prescribed medications when their premiums have not gone down. The insurers still charge them for insurance but will no longer pay for meds! Let OHIP+ cover the meds, they say.

The second major issue is with the doctors. To get a child on the more expensive drugs (which actually work), they have to spend hours filling out forms justifying their decisions. Then, to make matters worse, they need to fill out those forms at the beginning of every year, to justify the medications for another 12 month period. So much for trusting doctors to make the best health care decisions!

OHIP+ is still a new program that covers over 3 million young people. We will monitor and let you know if the government finds ways to streamline things for parents in this situation.

For more on this topic, check out this article from CBC. Click to open article …


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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 …Facebooktwitterredditlinkedinmail

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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.Facebooktwitterredditlinkedinmail

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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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