aria

Debt levels in Canada post a risk – ARIA post

john — Thu, 16 May 2013 20:13:50 +0000

(May 16, 2013) It’s goes without saying that at a time when the household debt to income ratio is at a record 165 per cent, debt is having an impact on people’s ability to save for retirement.
According to the Wall Street Journal, we in Canada “keep getting new credit cards … and despite all the worries about record-high household debt … (we) keep paying them off.”
Delinquency and default rates here remain low, the article notes, citing data from Equifax and Moody’s Analytics. Moody’s sees risk in Canada if the economy weakens, indicating that default rates could rise to 5 per cent, the article notes.
“Many Canadian consumers remain vulnerable to future economic weakness, while U.S. households have either restructured and rebuilt their balance sheets or have defaulted,” the report notes.
For the full story, click here.

ARIA provides a forum for an informed discussion on retirement income adequacy, and other related issues, including pension and retirement coverage, and defined benefit pension plans.

Real estate becoming a mainstream asset for pension funds – ARIA post

john — Thu, 16 May 2013 20:11:42 +0000

(May 16, 2013) Canadian pension funds are able, thanks to their scale and professional investment management, to invest in things that the average retirement saver can’t.
One such asset class, reports Barry Critchley in the National Post, is real estate. Once considered an “alternative asset,” it is now quite mainstream, states Stan Hamilton of UBC in the Post article. Hamilton, along with Robert Heinkel, authored a paper 20 years ago that recommended that pension funds begin investing in real estate, the article notes. Their view was that real estate “is the only asset class that reacts significantly and positively to expected inflation changes.”
Hamilton says in the early 1990s, only about four per cent of the industry’s assets were in real estate, the article notes. By 2011, that had more than doubled to just under nine per cent – to a value of about $100 billion, the article reports.
For more on this, click here.

ARIA provides a forum for an informed discussion on retirement income adequacy, and other related issues, including pension and retirement coverage, and defined benefit pension plans.

MROO debunks “myths” about public sector DB plans – ARIA post

john — Thu, 16 May 2013 18:56:02 +0000

(May 16, 2013) In an opinion piece published in Benefits Canada, the president of Municipal Retirees Organization Ontario takes issue with charges “by those in the anti-DB camp” that public pension plan shortfalls will have to be made up by taxpayers.
William Harford writes about critics of the Ontario Municipal Employees Retirement System (OMERS), who have suggested “taxpayers will have to ante up millions of dollars to bail out OMERS” because of its actuarial deficit.
However, writes Harford, “an actuarial deficit does not accumulate into a growing debt like a government debt. It is based on a point-in-time projection that changes year by year.”
As well, he notes, OMERS has a plan in place to deal with its deficit – employees and employers will contribute more, and receive lower benefits, for the next 10-15 years. “Once the plan returns to surplus, these temporary contribution rate increases will be rescinded,” he writes.
Investment returns, not taxpayer dollars, are responsible for two-thirds of the capital that has been added to the OMERS fund in the last 20 years, he writes. The rest came from contributions shared equally by employees and employers.
“The average OMERS retiree does not receive a gold-plated pension,” he writes – in fact, the average pension is $18,000. “But we do have some security regarding our retirement income. We are fortunate to have a large, well-managed, compulsory workplace pension plan like OMERS.”
Harford concludes that “rather than relegating all Canadians to an uncertain retirement by eliminating DB pension plans — and possibly replacing them with DC plans — we should strive to ensure employees are able to retire with both dignity and a predictable income in their senior years. Fighting to preserve DB pension plans is one way to accomplish that.”
To see the full article, click here.

ARIA provides a forum for an informed discussion on retirement income adequacy, and other related issues, including pension and retirement coverage, and defined benefit pension plans.

Green Party supports CPP, questions effectiveness of RRSPs – ARIA post

john — Thu, 16 May 2013 16:18:15 +0000

(May 15, 2013) Writing in her Hill Times blog, reprinted on the Rabble.ca website, Green Party leader Elizabeth May notes that today’s Canadian seniors have “different issues and challenges than in our grandparents’ day.”
And while it is great that we’re living longer, healthier lives, and playing a role as senior volunteers, there are challenges for seniors, she writes.
“Today’s seniors want to know that pension and retirement savings are adequate to maintain an active lifestyle. The Green Party supports expansion of the Canada Pension Plan. CPP is sustainable and reliable. It is time to review whether RRSP is working as a vehicle. Evidence suggests its uptake is very limited, it has a large impact on government revenues and yet it seems to benefit primarily those Canadians who least need it,” she writes.
The “most extreme challenge” of aging, she writes, “are experienced by seniors living in poverty, a disproportionate proportion of whom are women. While the percentage of seniors living in poverty dropped dramatically from a high of approximately 30 per cent in 1976, to a low of 4.7 per cent in 2007, the poverty rates for seniors have begun to move up once again – 5.8 per cent in 2008. We cannot be complacent about the economic struggles of our seniors,” she writes.
Other issues that are challenging for seniors are the lack of good public transportation and the rising costs of pharmaceutical drugs, she writes.
To see the full story, click here.

ARIA provides a forum for an informed discussion on retirement income adequacy, and other related issues, including pension and retirement coverage, and defined benefit pension plans.

Winnipeg authors offer a way to get out of debt – ARIA post

john — Thu, 16 May 2013 16:07:51 +0000

(May 15, 2013) Many Canadians who want to save more for their retirement – often because of a lack of a good pension plan at work – have a formidable adversary: debt.
Writing in the Edmonton Journal, Ray Turchansky reports on a new book by Winnipeg authors Laura McDonald and Susan Misner that “offers a plethora of practical tips, not only on how to avoid debt, but how to get out of it.”
Their book is called 10 Ways to Stay Broke … Forever, he reports, and provides “the roadmap to destitution: finance everything, make the minimum payments on everything, spend all you make, buy a huge house, buy a new car, take a vacation, buy more toys, buy the most expensive stuff, shop every day and eat out.”
Misner tells the Journal that “people have completely lost sight of affordability. The last 20 years with debt and credit being so readily available and interest rates so incredibly low, affordability became what the monthly payment was. We’re borrowing 95 per cent of a new car in Canada, financing it over five to seven years, when in fact if you can’t afford to pay off the car in three years, then you really can’t afford the car. We’ve lost sight that there are two sides to a balance sheet; we’re so focused on asset accumulation, buying things and adding things, like houses and cars, and financing it all.”
The article notes that the book comes at a time when Canadian debt is at a “record high of 165 per cent of disposable income.” And, Misner tells the Journal, a recent Stats Canada study found that a jump in interest rates of just two per cent would cause “over 600,000 Canadians … to lose their homes.”
For the full story, click here.

ARIA provides a forum for an informed discussion on retirement income adequacy, and other related issues, including pension and retirement coverage, and defined benefit pension plans.

Ron Mock to succeed Jim Leech as Ontario Teachers’ Pension Plan CEO – ARIA post

john — Thu, 16 May 2013 16:02:18 +0000

(May 15, 2013) The Ontario Teachers’ Pension Plan has announced that Ron Mock will become president and CEO of OTPP effective Jan. 1, 2014, reports Shanny Basar of Dow Jones.
“Mock joined the scheme in 2001 as director of alternative investments. In July 2008, during the financial crisis, he was promoted to senior vice-president with responsibility for all fixed-income assets and strategy, as well as alternative investments and hedge funds,” Dow Jones reports.
The article goes on to say that Mock will work with current president and CEO Jim Leech until the end of this year. “Leech also joined Ontario Teachers in 2001 and has been chief executive for the last six years,” the article states.
The article quotes an earlier Globe and Mail interview with Leech and notes that 2012 was “a very strong year for Teachers,” with returns of 13 per cent, and 10-year annualized returns of 9.6 per cent, despite the financial crisis.
By the end of 2012, the article notes, Teachers had assets of $129.5 billion.
For the full story, click here.

ARIA provides a forum for an informed discussion on retirement income adequacy, and other related issues, including pension and retirement coverage, and defined benefit pension plans.

Does Canada need a “minister for poverty reduction?” – ARIA post

john — Tue, 14 May 2013 18:40:33 +0000

(May 14, 2013) While today’s seniors – many of whom received defined benefit pensions – are generally coping well in retirement, many observers fear that senior poverty may re-emerge in the future.
Conservative Sen. Hugh Segal feels the federal government “should do more to tackle poverty, specifically create a new ministerial portfolio dedicated to reducing poverty in Canada, and a new tax credit for those whose income was below the poverty line,” reports the Canada.com website.
Poverty, he states in the article, is “the elephant in the room,” and “Canada’s most challenging problem.”
“There would be no new bureaucracy, no new overhead and, as every (tax credit) recipient would be ineligible for welfare after they were topped up in their province, provinces would save billions,” Segal states in the article. “Ottawa could, over time, reduce that part of the social transfer supporting welfare to the provinces based on the number of people who are being topped up through the federal tax system,” he notes in the article.
For the full story, click here.

ARIA provides a forum for an informed discussion on retirement income adequacy, and other related issues, including pension and retirement coverage, and defined benefit pension plans.

Graduates need to plan for debt – ARIA post

john — Tue, 14 May 2013 18:38:19 +0000

(May 14, 2013) Article after article urges Canadians to start saving for retirement while they are young.
Yet, according to a story by Gail Johnson in the Pay Day blog on Yahoo! Finance Canada, student debt is on the rise – a roadblock to significant saving for the future.
“Federal student debt has now surpassed $15 billion, rising at a rate of nearly $1 million per day, according to the Canadian Federation of Students. That figure does not include the credit card debt, lines of credit and provincial student loans owed by Canadians, which is estimated to be between $5 – $8 billion,” she reports.
As well, she reports, “the number of young people with debt loads of $25,000 or more when they leave university or college is on the rise, sitting at 27 per cent in 2011, up from 17 per cent in 1995.”
The article goes on to point out that student debt can’t be avoided via bankruptcy, and urges younger Canadians carrying student debt to come up with a long-term plan to pay it off. About 87 per cent of student debt is ultimately repaid, the article adds.
For the full story, click here.

ARIA provides a forum for an informed discussion on retirement income adequacy, and other related issues, including pension and retirement coverage, and defined benefit pension plans.

World’s workers aren’t prepared for retirement – ARIA post

john — Tue, 14 May 2013 18:35:28 +0000

(May 14, 2013) A study by the non-profit Transamerica Centre for Retirement Studies and Aegon “shows a lack of retirement preparedness among workers” around the world, including in Canada, the Fort Mill Times reports.
A total of 12,000 workers and retirees around the world took part in the survey, the newspaper reports, with only 12 per cent saying they were “very optimistic” that they “will have enough money to live on when they are retired.”
The article notes that employers and governments around the globe are “implementing measures to de-risk retirement programs and benefits,” which has shifted “many of the risks and costs of funding retirement … toward individuals and families, who are not yet equipped to deal with them.”
Individuals – lacking good workplace or government benefits – are not expected to “self-fund a greater portion of their retirement income needs and take greater personal responsibility for their future retirement readiness,” the article notes.
Other survey findings in the article:
• “Nearly two-thirds (65 per cent) of all respondents believe future generations will be worse off in retirement than current retirees,” the article notes.
• “Nearly two out of three employees (63 per cent) expect their government retirement benefits will be less valuable due to government cutbacks,” the article reports.
• “Forty-four per cent of employees surveyed expect their employer or pension fund will reduce their workplace retirement benefits,” notes the article.
For the full story, click here.

ARIA provides a forum for an informed discussion on retirement income adequacy, and other related issues, including pension and retirement coverage, and defined benefit pension plans.

CEP president calls for Canada Pension Plan expansion – ARIA post

john — Tue, 14 May 2013 18:01:08 +0000

(May 13, 2013) The president of the Communications, Energy and Paperworkers Union of Canada (CEP) – a private sector union – says his union “strongly supports doubling CPP benefits.”
In a letter to the editor of the Ottawa Citizen, Dave Coles says – in response to an earlier letter critical of CPP expansion – that it’s not just government unions that want CPP expansion.
“By gradually increasing, over a seven-year period, workers’ and employers’ contributions by slightly less than three per cent of wages we can bring the maximum CPP benefit (if it were in place today) to approximately $24,000 per year,” he writes.
“Expanding CPP will significantly improve retirement conditions for the 60 per cent of Canadian workers – 75 per cent in the private sector – who don’t currently have an employer pension plan and it will also provide greater retirement security for those with workplace plans,” writes Coles.
He concludes by saying CPP is “highly secure, and has far lower administrative fees than private pension plans. Payments are also tied to inflation and the program is portable across provinces and jobs, which is important with the growth in contract work.”
To see the full letter to the editor, click here.

ARIA provides a forum for an informed discussion on retirement income adequacy, and other related issues, including pension and retirement coverage, and defined benefit pension plans.