It won’t be launched for another year, but details of the Ontario Retirement Pension Plan (ORPP) were unveiled Tuesday, and it includes benefits indexed to inflation.
Last April, Ontario passed legislation to create a provincial pension for the more than 3.5 million people who do not have a workplace pension.
The ORPP will be phased in starting in January 2017, Premier Kathleen Wynne said at a downtown Toronto cafe.
“Three-quarters of Ontario workers aged 25-34 did not have a workplace pension plan in 2012,” Wynne said.
“It’s quite clear there’s a generational divide in terms of retirement security.”
The ORPP will require contributions from workers and employers, and will pay benefits that vary depending on how many years somebody is contributing and how much they earn.
It will be phased in starting on Jan. 1, 2017, for employers with 500 or more workers and no workplace pension, to be followed by medium-sized employers – those with 50-499 employees – in 2018.
The plan includes a maximum amount of monthly income that is almost double than what the Canada Pension Plan (CPP) pays for those who are earning up to $90,000.
Currently, the maximum benefit for the CPP is $13,110 a year, the Toronto Star initially reported. The yearly payout under proposed Ontario pension plan could be as much as $25,000 for workers earning a higher income.
Another difference from the CPP? Survivor benefits. If a worker dies before retirement and they are part of the plan, a lump sum based on the pension’s value would be paid out to their surviving spouse or beneficiary.
Business groups have been warning they may have to reduce staff or curb hiring because of the added costs of a mandatory provincial pension plan.
Last December, the Conference Board of Canada said the proposed Ontario pension plan will mean long-term increases in income that offset the small negative effect on the economy over the near-to-medium term.
Grace Tartaglia, owner of Image Makeover on Queen Street, is concerned about how she will be able to continue to afford six employees when she is forced to contribute to the plan.
“The bottom line is it’s going to be so hard for us to manage on a daily basis,” she says.
Keith Ambachtsheer, director of University of Toronto’s Rotman International Centre for Pension Management, says there should be other alternatives available.
“I think the concept (of the ORPP) is right,” he says. “I think we need to get people into workplace pension plans that are cost-effective and universal. What I would like to see however, is for the ORPP to not be the only alternative. I would like to see the private sector come up with an alternative to the ORPP that would qualify as an equivalent plan, that would give employers the opportunity to choose between the ORPP and an alternative, and would also maybe give workers a chance to look at different designs and see which one they like better.”
Ambachtsheer also says older workers will likely benefit more than people just entering the workforce, but those who contribute to the plan from the start of their careers will get the most out of it.
“It’s quite possible that relative to the amount they contribute, that older workers will get a better deal than younger workers,” he said. “On the other hand, if you want to get full benefit out of this thing, you need to go the whole 40 year route.”