Ontario approves launch of ORPP in 2017

Two-thirds of Ontarians could be forced to join

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Ontario Premier Kathleen Wynn (The Canadian Press)

Ontario Premier Kathleen Wynne (The Canadian Press)

TORONTO – Ontario has passed legislation to create a provincial pension plan for people who do not currently have a workplace pension plan, starting Jan. 1 2017.

The Liberal government used its majority to give final reading to the bill to create an Ontario Retirement Pension Plan, insisting the province must take action because the federal Conservatives refuse to enhance the Canada Pension Plan.

» Wynne’s ORPP will change savings habits

» Half of Ontarians may not need to save for retirement

Associate Finance Minister Mitzie Hunter says about two-thirds of Ontario workers do not have a workplace pension, and virtually all of them will be forced to join the provincial plan.

Mandatory 1.9 per cent contributions from employers and workers will be phased in over two years, starting with larger companies in 2017 before moving to smaller operations like convenience stores and dry cleaners.

Business groups warn that forcing workers to pay up to $1,643 a year for a provincial pension — and mandating that employers match those contributions for every employee — will drive up costs and result in fewer jobs.

The Progressive Conservatives call the Ontario Provincial Pension Plan a job-killing payroll tax, but the New Democrats say it’s the “best option” for workers until the Canada Pension Plan is enhanced.

Ontario wants to mirror the CPP as much as possible, and Hunter says the province still would prefer to enhance the CPP instead of creating its own provincial plan. Contributions would be ”locked-in” just like CPP contributions, prohibiting people from cashing them out before retirement.

15 comments on “Ontario approves launch of ORPP in 2017

  1. We maximize and invest our TFSA’s, RRSP’s putting the full $20,000 and $15,000 in RRSP’s+ $5,000 annual RRSP income tax refunds in 2015 . We are conservative and but long term provincial zero coupon bonds. We can get about 3.2% yields these days.

    We hope yields, rates go back higher to 3.8% to 4.20% like back in 2013 to 2014. We will never see any of this ORPP because we are in our late 40’s, 48 and 49.

    We have no mortgage and no debts at all with a $450,000 house free and clear. We have successfully accumulated $560,000 in RRSP’s, $92,000 in TFSA’s, $275,000 in GIC’s and zero coupon bonds, $30,000 in term deposits, savings accounts.

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    • Good for you but how is that relevant to the article?

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      • I read Jane’s whole comments and from what I gather, she is saying that they will not benefit from this ORPP because they are are almost 50 years.

        Also, they have decided to be financially responsible and take advantage of RRSP’s and TFSA’s tax deductions, tax free compounding of interest. They started much earlier than most people and saved, invested wisely.

        They seem to like the slow and steady wins the race crowd and not depending on some government program and bureaucrats.

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    • Jane Goodwellen, I know what you mean about the ORPP, we will see probably not much benefit if nothing at all as we are both 56 years old. We would rather have our $2,000 a year in our investments.

      I did look into some provincial coupon provincial zero bonds and they are higher now than what you quoted. They are now 3.35% to 3.40%. I hope they go to 3.80% to 4%+ too in coming months.

      We are depending on our rigorous, annual savings plan so we have a decent nest egg in our RRSP’s, TFSA’s, non-registered accounts, GIC’s, bonds, Canadian dividend paying stocks to help us retire in 2020-2021.

      There are corporate zero coupon bonds at 5% to 5.6% but with the highest GIC’s paying 2.20% to 2.70%, this seems too high of a rate, yield and it looks like they have to pay this to attract investors. It looks to good to be true in our opinion in this low interest rate.

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  2. These type of policies such as mandatory holidays and now this Ontario pension plan kills young entrepreneurs plans before they even start and gives large employers on more reason to leave the provence.

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    • This government is hiking hydro rates, electricity prices, taxes, ORPP contributions and this makes it harder for small and medium size businesses to get started and grow plus it is more difficult for larger companies to expand as well.

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  3. Might be the worst idea I’ve heard in a long time.

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    • Ben, I agree. This is the government desperate to force people to have something when they are old and grey. I am a young person, 21 years old.

      They are so obsessed getting into the biggest home, condo possible and are in debt so they can’t and will not save, invest for their future.

      I just started contributing to my RRSP and TFSA in 2014 and I made sure I maxed them out. I am renting and have no debts and a decent job, I am making currently $48,000 a year working 6 days a week full time in the shipping and delivery business of about 35 employees.

      I have set aside $20,000 last year which includes $2,700 income tax refund. I put $6,000 in a 1.75% Oaken savings account and the rest in RRSP’s and TFSA’s in 3 different provincial strip bonds which mature in 2045-Dec-1, 2046-Dec-2 and will be worth $45,000.

      If I do this for at least the next 30, 35 years, this will grow to millions at even lower interest rates these days.

      Nobody is talking about the retirement age the ORPP will be. My guess, it will start at 65 and increase to 75 gradually in the next 10, 15, 20 years plus. Demographics guarantees this.

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      • Looks good Amanda, I would also consider inflation in your investments. Think about how far $2 million will go in 30 years, and decide if stocks are a smart place to put money as opposed to bonds.

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  4. O.R.P.P……..Ontario Removing Pay from your Pockets……….this is just another excuse to create a revenue stream to take money out of the pockets of hard working people to fund some Utopian fantasy fun land for the liberals and to further cripple the independence of citizens in Ontario. Everyone knows that if you have wealth, you have freedom of movement and a voice in what goes on but turn everyone into money making machines and they are too busy just trying to stay live and pay the bills to see what the government is doing. Instead of robbing and thieving more and more and more money from us, did you ever think of tightening up in places where you are pissing money away? stop with the stupid decisions that cost billions of tax dollars every time you decide something……..have a look at how the little person has to live and then you will see the extremes you create and be ashamed……..from poor crime enforcement funding where kids and innocents are being killed and injured to the elderly, who have slaved their whole lives and cannot ever afford something as easy as good dentures to eat with and maintain their dignity…..that may sound odd to you but then government members have guaranteed pensions and benefits don;t they……try implementing that same template for the average person and stop treating them a source of revenue to piss away.

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  5. Although I agree with the premise that most Ontarians are not saving as much as they should be. Here is a news flash… how about our Liberal government stop spending money, increasing taxes across the board, pay back the billions they have wasted themselves and stop piggy backing on the back of the hard working families they are supposed to be representing. The bigger issue at hand is there is only so much money in the pot, a recent independent study shows a large number of companies who ARE participating in a pension plan of some sort would cease that plan as they would be forced to adopt the ORPP. The ORPP has been set up at this point to only allow exemptions for comparable plans that have a defined benefit. A large majority of plans are a defined contribution. Surveys indicate that many employers say they will either reduce contributions to existing DCs and GRRSPs, or discontinue them altogether, if faced with an additional 1.9% payroll contribution to the ORPP. If that is the case, how is that helping Ontario. Please write your MPP and express your concerns with this bill, it can still be changed.

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    • companies with existing plans are exempt…does not form part of general revenue…because ADOLF HARPER won’t implement enhanced cpp provinces are left on there own to deal with the future needs of an impoverished class of pensioners…. our kids are not expected to do as well as their parents …not a good scenario….millions of people 30 years from now will be eating out of garbage cans and living in shanty towns…..this plan is not for the current group of workers but for the next generation ….

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  6. My group RRSP means what now? Here’s how I think Wynne will implement the ORPP..

    Step One: of Kathleen Wynne’s ORPP Plan. Initiate payroll tax to start the ORPP program.. 1.9% contribution for employee/employer.. Instruct ORPP (Wynne’s friends and cronies) board to hold off on foreign (incl national) investing for a period of 5 years to build the fund’s cash..

    Step Two: The ORPP will purchase bonds from the Ontario Government. As the ORPP cannot invest elsewhere (outside country/province). Ontario will be deemed as “safe” and will be a massive part of the initial few years..

    Our money floods into Wynnes’ hands.. Funding the Liberal budget.. Short-changing the pension fund already!..

    Step Three: Fund the Infrastructure spending plan announced in the Ontario Liberal Party budget.

    Step Four: Well step four is irrelevant as we are already screwed (and the libs achieved the objective).. Liberals will have amassed even more debt.. With the inability to pay it’s debt the province will be downgraded further costing even more to keep borrowing.. Step four will be a legislative review in ernest probs 4-5 years vs 10 yeer proposal..

    By this time most companies are seeing the writing on the wall and offering employees an alternative private plan in order to not pay into the ORPP..

    Step Five: Wynne dissolves the ORPP (or opposition party [elected] will kill the ORPP or leave it for 30+ years in hopes of recovery) as the fund would have essentially collapsed. Ontario spirals into insolvency – While the rest of the country thrives. Ontarians take a haircut.. The question is how much???

    I asked for fiscal responsibility with my vote.. What did you ask for?

    I know there are likely laws and the fiduciaries obligations of investment managers etc etc. I like to think anything can happen in a “free” market so i’m a little concerned.. What do you think? Keep an open mind – weirder stuff has happened…

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  7. I can’t seem to understand why ORPP is being rammed through. Other than because it was Wynne’s election platform promise and she has a vested interest in making it happen. There are RRSP and Pension providers on every street corner including banks, investment dealers, credit unions and insurance companies. All offering, sometimes begging people to save in their plans. People that can save, will do so if they have discretionary income. There are hundreds of thousands if not millions of people in Ontario that have no discretionary income to save, because they need it to buy food, shelter and clothing and education costs…for their family. One point that is not being mentioned clearly are the thousands of self employed independent contractors with or without paid help that are already paying both sides of the 4.95% or 9.9% of their income to $49,000(2014) for yearly CPP contributions($4,851). Now they will be forced into paying both sides of the 1.9% or 3.8% of the yearly ORPP contributions on $90,000($$3,420). Doesn’t add up to a very good economic solution for retirement planning. Looks to me like it will crush small business, employment and consumption instantly in Ontario. Better training, education and capital spending by the government = Higher wages and higher productivity and incomes for working people in Ontario. Not a tax on our incomes.

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  8. all pension plans with public funds should be in trust and cannot be used for any thing but the purpose it was intended for. it cannot be used for/buy anyone except in a garinted return on investment
    we the people of Canada have seen the results of government borrowing and not paying back.

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