Forget businesses, ORPP legislation could mean a revenue reduction for many Ontario advisors.
The Ontario Chamber of Commerce says the new pension legislation
being introduced by the Ontario government will cost the average business in the province with 10 employees earning $45,000 per year an additional $8,000 in matching contributions for those employees.
Only 23% of a 1,000 businesses surveyed by Ontario’s 160 chambers found said they would be able to afford the extra costs associated with ORPP, which is intended to be a top-up to the existing CPP.
Ontario Chamber of Commerce CEO Allan O’Dette says about its members, “Employers worry that by making it more expensive to hire, the new pension plan will negatively impact job creation and hurt Ontario's competitiveness. Combined with increases in electricity prices, high WSIB rates, and, for many employers, a higher minimum wage, the new pension plan will burden businesses that are already struggling to meet the rising cost of doing business in Ontario."
That very well might be but we won’t know exactly until the legislation is analyzed further which could take a considerable amount of time.
In the meantime, WP wonders what advisors think of this legislation. In May when the plans for ORPP were first revealed in the Ontario budget, details suggested those earning up to a maximum of $90,000 per year could contribute 1.9% of their income to the plan with their employer matching that amount providing eligible employees with an additional $3,400 in annual retirement savings. Savings they wouldn’t otherwise put to use.
With these funds going into a pooled pension plan to be managed by a third-party portfolio manager, the need for an advisor becomes even less essential. While businesses might consider the pension contribution match to be an additional tax, it’s hard to imagine the average employee having a concern with the program.
Advisors might argue that a group RRSP accomplishes the same thing without the added financial costs the provincial government will incur in order to create and maintain this pooled pension plan.
In a follow-up article WP will seek the opinion of advisors. Perhaps their reaction won’t be nearly as negative as one might assume.
Then again, maybe it will. Stay tuned.