Advisors continue to voice concerns about the Ontario Retirement Pension Plan, even as Queen’s Park moves to iron out other challenges to implementation.
“It’s going to affect small business negatively,” says Kingston, Ont., advisor Jason Howes, who like other advisors in the province wanted the government to move in the direction of private pension funds. “It is really a lot like adding a new tax.”
While Howes stresses that his opinion of the ORPP is strictly his own and not that of his employer, it is an opinion that is shared across the financial investment sector, and by the vast majority of small business owners.
One business owner quoted in a recent Globe and Mail
story estimates the pension plan will cost his family-owned business, which employs 30 people, about $12,000 to $15,000 a year per person, outside of contributions.
Those concerns resonate with advisors, who appreciate the rationale behind creation of the ORPP, but point to better ways of encouraging more Ontarians to save for retirement.
“It is something that should be taught right from elementary school, because a lot of people don’t know how to balance a chequebook,” he says. “Tax incentives would definitely create a solution for families to save money; because people definitely aren’t saving enough for retirement.”
As to how much is enough to retire on, Peter Wouters, director, tax retirement and estate planning services, wealth with Empire Life, says that retirees will need 100 per cent of their consumption dollars and some extra money in the early, active years of retirement for the special trips and experiences they have dreamed about for years; with the actual replacement income goal dependent on marital status, whether they own a home, have children, or how much money was being earned.
The details of what ORPP will eventually look like are few and far between, but what is known is that if clients have an employer-matched RRSP plan, they will be expected to pay an extra 1.9 per cent from their paycheques for participation, with employers matching. As currently constructed, those plans are not considered adequate.
Defined contribution plans that meet the province’s standards will be exempt.