More Details of the ORPP

Now they are using taxpayer dollars to promote the ORPP.
A few weeks back, Ontario announced a few more details of its made in Ontario pension plan.

The Ontario Retirement Pension Plan (ORPP) will apply to everyone without a defined benefit plan or a defined contribution plan that doesn't meet their standards.

The premium will be set at 1.9%. That means we'll have 1.9% less from your paycheque. Additionally, employers will be forced to match the employee contribution.

The plan will start in 2017 where large corporations will be first to contribute to the ORPP. Eventually, everyone will be enrolled into the ORPP by 2020.

For a person who earns $50,000 a year, they will receive $950 less a year.

This is a good thing, right? The government is helping us save our money.

Personally, I'm skeptical this is the answer. I'm also skeptical that the money we contribute will actually be invested in equities and bonds. No where on the government site does it explain how our contributions will be invested.

From the government's press page:

Building a more secure pension plan so everyone can afford to retire is part of the government's four-part plan to build Ontario up, which also includes investing in people's talents and skills, making the largest investment in public infrastructure in Ontario's history, and creating a dynamic, innovative environment where business thrives.
Maybe I'm misreading, but it really looks like they are telling us that they plan on using the money to build up Ontario's infrastructure. Maybe that's not what they meant, but if they end up doing it, they can claim they didn't mislead Ontarians.

Another thing, the Ontario government has admitted that they don't know how much administering a pension plan will cost.

I think it's safe to assume that means this will cost BILLIONS (see e-health, ORNGE, gas plant scandal, etc.)

Last year, when the plan was in its infancy, the Liberals touted a MER of 1%. Excellent if compared to the MERs of the big banks!

But not everyone invests with the big banks. As you know, I invest my money with Vanguard/iShares ETFs that are traded on the Toronto Stock Exchange. The MERs for these funds range from 0.05% to 0.20%. Much, much lower that the estimated MERs. We all know governments love to underestimate numbers that work against them and overestimate numbers that work in their favour. Need I say more?

Of course, this plan is only expected to help a small number of Ontarians. The majority of whom are low income earners. These are the people who can least afford this additional payroll deduction.

Unfortunately, that's all the information available at the moment. A prevailing theory for this is the fact that there is a Federal election campaign happening. For this reason, the Ontario Liberals don't want to jeopardize the chances of the Federal Liberals by releasing the full details of the unpopular ORPP.

As for me, I don't have a pension plan at work. I'll be forced to contribute my 1.9%. That means fewer ETF purchases for me when 2020 rolls around.


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