As some of you will be aware the government of the Province of Ontario is planning to introduce a mandatory pension plan for those that work at companies without a plan or are self employed.

Employees at companies with a pension plan that meet the provinces basic criteria (as to payout amounts on retirement) are exempt from the provincial plan.

The federal government does not support this move and won’t assist with administration of the plan through the current CRA tax collecting processes so Ontario will be up against extra costs to set up and administer their plan.

What does this mean?

Once Ontario’s plan is up and running the Canadian pension landscape will have the following possibilities for individual incomes post retirement (i.e., when you have no income from employment/self employment).  If you don’t stop working for an income these options do not necessarily apply.

Here are the possibilities (assuming other provinces have not followed suite).  (note disability incomes are not considered)

ALL CANADIANS (outside of Ontario)

1)OAS  –   everyone who has lived in Canada more than 10 years

2)CPP –  everyone who earned an income (employed or self employed)

3)Company Pension –  this is selective and will depend on whether you have worked for more than 2 years (vesting period) for a company with a pension plan.  These plans can be defined contribution or defined benefit and have various requirements for contribution during your employment ( from $0, employer contributes everything to a percentage of your income shared with an employer contribution – that could be linked to amount of your contribution or not)

ONTARIAN

Could have all of the above in addition to the following, however, if they do not have 3 above they will at least have the following:

4) OPP  –  you contribute, Ontario contributes if you are not employed in a Company with a pension (so if you switched jobs you could have this income and #3 above)  This applies to self employed as well.

What does this mean/ Do we care?

Quebec has long had very different tax laws around exemptions, contributions and other stuff so a province doing their own thing financially like this is not unique.   The real question is the cost to an Ontarian reasonable versus the benefit.  In other words is there value to this program.  I have read good arguments on both sides.

For me, I consider a retirement planning is a personal obligation and on the whole governments should stay out of it.  (This is probably classified as a conservative view on the political spectrum.)