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21 | Friday, April 25, 2014 | OAKVILLE BEAVER | www.insideHALTON.com At a time when traditional company pensions are rapidly disappearing, and CPP benefits are capped annually at $12,000, there is agreed sentiment that doing nothing will leave millions of middle-class earners vulnerable in retirement years. Several provincial finance ministers, including Sousa, have stepped forward to urge the federal government to move on reforms, including implementing modest increases to CPP contributions. But calls to prop up the federal program have ultimately fallen on deaf ears. The late for mer Canadian Finance Minister Jim Flaherty said the nation's economy isn't strong enough to support the increased taxation needed to bolster the fund. Policymakers are nervous about declining savings, increased household debt and an overheated housing market. Flaherty had suggested taking more out of incomes of most of the working population isn't a sound idea. "Right now the federal govSusan ernment is apprehensive about Eng doing any of this, which is strange because it is in the benefit of Canadians in the long term," Sousa said. Frustrated by federal foot-dragging, the province is drafting its own vision for an Ontario Pension Plan to supplement the CPP. Earlier this year, Ontario Premier Kathleen Wynne appointed former prime minister Paul Martin as a special adviser on pensions. Martin will contribute to a technical panel comprised of pension experts. Eng and other retirement savings experts suggest that individuals require 50-70 per cent of their pre-retirement income to maintain their standard of living in retirement. Most Ontarians can't save enough to meet that target. Eng says, at best, with CPP and Old Age Security combined, one can earn about $18,000 annually post-retirement. Most Ontarians earn about $9,000 from CPP and Old Age Security, she said, with the average monthly payout less than $600. Chris Buttigieg, senior manager, Wealth Planning Strategy for BMO Financial Group, says sole dependence on CPP after retirement is a dire mistake. "Given the amount that the CPP ... pays out, Canadians should not rely on them as a primary source of income to fund their retirement," he said. "Rather, they should consider the CPP ... to be a supplementary component of their overall retirement income solution and focus on creating their very own personal pension plan by contributing to an RRSP on a regular basis." Others are counting on the sale of a home as a way to fund retirement. That's exactly what Sung Joo Park, a selfemployed caterer, did after she turned 60. Park, 76, lives in a rented apartment in Mississauga. Her husband, Jong Joo Park, 82, died earlier this year. Neither one of them had a private pension plan. "It's hard," she said. "Life was a lot easier 20 years ago." Eng is calling on Ontario to make workplace pension plans mandatory. "It has to come into existence and somebody has to cre- ate it," she said. Details on an Ontario plan still need to be ironed out. The plan though would likely be run by an independent organization at arms-length from the provincial government. It would also use a defined contribution system that allows workers the choice to opt out. Sousa is keen on the idea of a mandatory system with an opt-out clause, similar to what's being done in Quebec and also in other countries. The Liberals remain steadfast on introducing new reforms. But any new pension would have to be approved by the Ontario legislature where the Liberals hold minority status. If the opposition parties vote down the government, the province will face an election, and a pension scheme for Ontario could be put on hold. Nothing is guaranteed, not even your private pension By LOUIE ROSELLA Staff If you're enrolled in a pension plan, chances are your money is safe. Maybe. Perry Quinton, vice-president of marketing at Investor Education Fund (IEF), a non-profit organization founded by the Ontario Securities Commission, says anyone who is either looking for work or already employed should view privatelyfunded pension plans as a necessity. "It can be free money that if you don't sign up for it, you're not going to get it," she says. "Any kind of incentive that forces you to save money is brilliant." Quinton and her organization say there are mainly two types of private pension plans offered in Ontario: · a defined benefit pension plan, where the employer promises a specified monthly benefit on retirement that is pre-determined by a formula. It's up to the employer to deliver what they promised when you retire. If a plan doesn't have enough money, the employer will have to put more money into the fund. · a defined contribution pension plan or Group Registered Retirement Savings Plan (Group RRSP), in which both you and your employer can put money into the plan. In either case, a trust company or insurance company holds this money in a separate account for you. You, not the company, own that money. Even if your employer goes bankrupt, your money is safe. Of course, you can always lose some or all of your money if the market crashes or if you don't invest it wisely, the IEF says. Your pension plan should not run out of money if the employer manages the fund properly, Quinton says. Even if the worst happens, some of your pension savings may be protected. In Ontario, most employers of defined benefit plans pay a yearly fee to Ontario's Pensions Benefits Guarantee Fund. This fund insures the first $1,000 of an employee's monthly pension in case the employer goes bankrupt. It's the only fund of this type in Canada. However, not even this unique fund will guarantee that an employee gets all of his/her promised pension, Quinton says, noting the infamous Nortel Networks bankruptcy case in which employees didn't receive all of their promised pension. Should an employee be fired or choose to leave the company, depending on the type of plan, he/she may have the option of transferring their pension earnings into another plan, Quinton says. They could also leave it where it is and collect at time of retirement or transfer into a locked-in retirement savings account (LIRA), which works much like an RRSP. There is always the chance that a company chooses to shut down its pension plan, which it can do at anytime. "If the plan was properly funded, you should get everything you have earned so far," Quinton says. However, if the plan was underfunded, you may not get all you're promised, Quinton says.