Are Employer Pensions in Canada Dying ?

Stats Canada published an interesting study of Pensions last week, entitled, “Pension plans in Canada, as of January 1, 2014 “, and in it was the great news that more Canadians (total) have pensions (from 2012 to 2013).

Looking at all sectors and all types of pensions 169 more Canadians had Pensions from 2012 to 2013 (no that is not in hundreds of thousands, or thousands, it is 169). For all intent and purpose there were the same number of folks with pensions, however, the types of pensions that they have, has changed a fair amount.

  • There are 20,868 less folks in Defined Benefit Pension Plans
  • There are 6.428 more folks in Defined Contribution Plans
  • There are 14,609 more folks in Hybrid Pension Plans, where Hybrid means, “Other plans include plans having a hybrid, composite, defined benefit / defined contribution or other component.

So what does this really mean? I think the idea of the work related pension is changing (some might say becoming extinct, but maybe not just yet), and most folks (next generation after me) is going to have to take care of their own retirement savings. I was lucky enough to fall into a pension, but unless you work for the government (or a bank) you are unlikely to have a classic pension plan (private sector pension plans are down 0.2%).

This explains why you have some folks (like the Ontario government) that think that folks need to have more retirement savings, and they are going to impose it on you (with the proposed new Ontario Provincial Pension), whether you want it or not.

What is interesting is in the mid-90’s folks at Nortel wanted out of the Pension Plan (a defined benefit program at the time) because it was screwing up their ability to put money in their RRSPs (many thought they weren’t going to stay at Nortel their entire career (and they were right, in hindsight)).

Is the idea of a company pension dead? Opinions, dear reader?

Registered pension plan membership, by sector and type of plan

From this page at Stats Canada

  2012 2013 2012 to 2013 2012 to 2013
number number net change % change
All sectors: Total 6,184,990 6,185,159 169 0.0
Males 3,092,479 3,108,762 16,283 0.5
Females 3,092,511 3,076,397 -16,114 -0.5
Defined benefit plans 4,422,838 4,401,970 -20,868 -0.5
Males 2,053,060 2,044,367 -8,693 -0.4
Females 2,369,778 2,357,603 -12,175 -0.5
Defined contribution plans 1,030,319 1,036,747 6,428 0.6
Males 616,941 625,165 8,224 1.3
Females 413,378 411,582 -1,796 -0.4
Other plans1 731,833 746,442 14,609 2.0
Males 422,478 439,230 16,752 4.0
Females 309,355 307,212 -2,143 -0.7
Public sector 3,179,312 3,184,276 4,964 0.2
Males 1,183,046 1,185,486 2,440 0.2
Females 1,996,266 1,998,790 2,524 0.1
Defined benefit plans 2,995,771 3,002,068 6,297 0.2
Males 1,104,591 1,107,382 2,791 0.3
Females 1,891,180 1,894,686 3,506 0.2
Defined contribution plans 146,290 143,034 -3,256 -2.2
Males 60,749 59,493 -1,256 -2.1
Females 85,541 83,541 -2,000 -2.3
Other plans1 37,251 39,174 1,923 5.2
Males 17,706 18,611 905 5.1
Females 19,545 20,563 1,018 5.2
Private sector 3,005,678 3,000,883 -4,795 -0.2
Males 1,909,433 1,923,276 13,843 0.7
Females 1,096,245 1,077,607 -18,638 -1.7
Defined benefit plans 1,427,067 1,399,902 -27,165 -1.9
Males 948,469 936,985 -11,484 -1.2
Females 478,598 462,917 -15,681 -3.3
Defined contribution plans 884,029 893,713 9,684 1.1
Males 556,192 565,672 9,480 1.7
Females 327,837 328,041 204 0.1
Other plans1 694,582 707,268 12,686 1.8
Males 404,772 420,619 15,847 3.9
Females 289,810 286,649 -3,161 -1.1


CANSIM table 280-0016.



Diving Loonie

The Dive of the Loonie in January

Welcome back the Family Allowance, as the Tories change the UCCB to become a taxable benefit, and we return to the happy world of the Family Allowance cheque (which at the end of the program was given and then clawed back if you made enough money). Interesting that the new UCCB pays out now, but a lot of folks who don’t realize it is a taxable income source, won’t figure it out until after the election? I know, the Liberals & NDP (and me) will be pointing that out long before the election.

Now there is talk of a real deficit this year (not a big one, but no balanced budget to go into the election with either). What with all the talk of recession (check out the CBC’s panel at the end of this and their views on this) and it looks like the economy may be a liability for the Tories, instead of a rallying point for voters.

Thanks to the drop in Interest rate drops last week, the Canadian Dollar is at an 11 year low, and doesn’t really show any sign of dropping either (so if you were planning a fun trip to the USA, it is going to cost you some more). For our American friends, come on up, everything is now much cheaper than it was last year.

Bell is now being forced to share their high-speed internet home connections? I applaud the CRTC for helping make sure there is competition for home high-speed internet access.

My Writings for Week Ending July 24th

Glad to see I am living in “sin city” in terms of Ashley Madison subscriptions :

Kobo Canada

I am still on this fine list from LSM Insurance:

Click here for many more great financial stories


New UCCB and Taxes

So the Harper Government introduced the much vaunted New and Improved UCCB  (universal child care benefit) this month so parents (with eligible children)  have been receiving payments, and from what I can tell of the parents I know it has been viewed as a positive thing. Mrs. C8j received the new payment and the back payments as well (conveniently paid just at the start of an election campaign (sorry that just slipped out)) for Young C8j, which was nice to see in the bank account.

Before you go blow all your new money on “penny whistles and moon pies”, remember this is a taxable benefit. The UCCB is taxable income, but, in the hands of the lower-income earner in the family. For the C8j family (which I think is the Tories target audience, surprisingly) it is not a bad thing, because Mrs. C8j’s income is less than mine, so the UCCB cheque will be a less taxed benefit, but those dual income families where both spouses have high paying jobs, are going to be paying the tax-man (more (depending on their income levels)) for their UCCB cheques.

UCCB and Taxes

Not Quite As Portrayed

I claim to be part of the Tory target audience since I also was able to take advantage of the Family Tax Cut as well (this one only works if your spouse makes significantly less than you do). It is kind of weird to think that I am one of their target audience, but bring on the tax breaks!!

Welcome back the Family Allowance Cheque, we have missed you so (yes this is how baby bonus cheques were handed out and clawed back).


The CRA Does Not Like Change

Here is a Tuesday Quickie for you, I have pointed this one out a few times, but my Theory has been proven:

Whenever you have a major change in your life that causes a change in  your tax status, the CRA will ask for you to send receipts to verify it (i.e. a Review not an audit).

A simple theory, but it has been proven countless times for me:

  • Each time one of my kids started at University, either I or my child was asked to supply T2202A forms from the school.
  • When they moved from residence to a rental off campus, receipts for the rental
  • When I claimed my son’s school fees as a medical expense.
  • My middle daughter has just started a Chiropractic College, and the tuition fees are MUCH higher, thus the CRA wants receipts.

It’s not a big thing, and fairly easy to remedy, just keep this in mind, and keep those receipts.


RDSP Questions and Answers

Yet another interview, helped me create this set of questions, and answers, on the topic of Registered Disability Savings Plans. As with all my advice in this area, I start with check the CRA RDSP Web Page Link, and read about this topic yourself, but hopefully some of these answers I put together will help. As for what happened to the article that was to come from this “interview”, I haven’t seen anything yet (I seem to be fun to interview, but the information I give out, isn’t very print worthy).

1. Approval for the Disability Tax Credit is required before an RDSP can be set up for an individual. It may be for a specified term or indefinite. How hard is it to obtain? Do you think disabled people or their caregivers need the assistance of a consultant (for fee or on commission) to get the approval?

For us, it wasn’t too hard, but luckily we had the help of Ottawa Children’s Treatment Centre through CHEO (Children’s Hospital of Eastern Ontario) when my son was diagnosed with Autism. They assigned a social worker to help us, and the Psychologist who did the diagnosis filled in the appropriate forms (T-2201) to get the DTC, and then helped us get the DTC review “backdated” to when my son was born, as Autism is viewed as a disorder of brain development  (or as a from birth disability).

I have been fairly vocal in my dislike of “for fee or commission” firms that “help” folks get their DTC, as I think it is something that most folks should be able to do (with the help of their diagnosing physician). Many of these firms take a percentage of the DTC pay out, and some even attach trailers, so that they get a commission every year, which I think is excessive (if not loathsome).

2. What other free or low cost services are available in the community to help people making an application?

As I have said, we got help from OCTC, I would assume that if you lived near a large metropolitan area, the children’s hospital should be able to help you out. Ultimately this is a job for the diagnosing physician.  I have been told by a few of my readers that there are help groups in many communities that help folks (for free) get things done, if their physicians are unfamiliar with what needs to get done. Look on-line is my advice to look for this information at sites such as , Autism Ontario, or Children at Risk.

3.  Can you give me some examples of situations where eligibility for the DTC might be time limited and require re-application?

Depending on the diagnosis or how it is written up it can be either in perpetuity or for a fixed period of time. In our case we will have to reapply in about 5 years, because with some diagnosis (like high functioning Autism), the CRA wants to see if a “disabled” label is still justified.

My guess would be that with other permanent disabilities, it would be unlimited, eligibility

4. Who can set up an RDSP?
OK, let me preface this by saying ALL of this information is on line on the CRA’s web page.

If the child is under the age of majority, the parents, guardian or any public department or agency, that is legally authorized to act for the child can open an RDSP.

If the beneficiary is old enough and competent they can open one themselves, or their legal representative (guardian, parent, etc.,) can do so as well. A Qualified Family Member (QFM) can also do so, under the right circumstances.

5. What are minimum/maximum ages for participation in an RDSP?

Minimum age is birth, the maximum age and benefits stop being paid into the plan after the age of 59, so I guess that is the maximum age, but it may not make a lot of sense around that age, as the grants stop being added after the beneficiary turns 49.

6. When can the funds be withdrawn?
At any time, however, the program is designed for long term savings, so the government will ask for all bonds & grants paid over the past 10 years (up to that amount) as a penalty, if money is taken out early. Now if there is a shorter life expectancy (less than 5 years) there are rules to allow for limited withdrawals with less penalties.

7. Is the money in the fund taxable when it comes out?
Yes, parts of the money are taxable, depending on how large the grants were that were put into the plan by the government, and the growth of the money in the fund.

8.When selecting a financial institution to set up an RDSP, what questions should a consumer ask and what answers should they be looking for?
In our case, the obvious questions were: am I going to be able to  buy whatever I want? or will I be restricted to only buying specific Mutual Funds or GICs offered by the institution? For our situation, we went with TD Waterhouse because we had a great deal more flexibility in how the money could be invested in (in our cose low management fee index funds and GICs). Also TD Waterhouse was one of the first institutions to offer the savings program (that had this flexibility), and I had accounts already with Waterhouse.

9. How can funds in an RDSP be invested?

That depends on what the institution lets you purchase. If it is a GIC based vehicle that is all you can buy, if it is a Mutual Fund based solution, only the funds available from the provider, but ideally it should be like an RRSP, RESP or TFSA, saving in whatever you want to save in.

10. In your experience, do fees vary significantly among financial institutions?
I am not sure what other institutions charge, I know about the TD set up, but any fees over and above Management Fees for funds strike me as punitive and a bad thing, given who the money is intended to help.

11. What happens if you don’t have enough money to contribute every year on behalf of your child or dependant? Carry-forward of grant and bond eligibility?
The maximum amount eligible to deposit into a single RDSP (you can only have one for each beneficiary), is $200,000, and there is no maximum how much you can put in any year, so in theory, you could put the whole thing in, at the beginning, HOWEVER, the matching grants do have limitations.

12. Can a parent, relative or friend transfer money from an RRSP or RRIF to an RDSP? What are the tax implications of doing so?
Yes, there is an ability to roll moneys from an RRSP into an RDSP, but it does count against the total $200K limit, and will only get some grants money, for the year.

13. In what circumstances might it make sense to borrow money to make an annual contribution?
That’s a very good question, and I don’t really have an answer on that one. It depends on your ability to withstand interest payments and such? Given the grant and bond money is dependant on the parents’ income (until the age of majority is reached), it becomes a catch-22, should the parents go into debt on this? I think folks need to do the arithmetic for themselves and see whether it is worth taking on that risk.

14. What happens to the money in the account, the bond and grant money if an individual no longer meets the criteria for the DTC? i.e gets a heart transplant and resumes the normal activities of daily life.
Not sure about the heart transplant, I think you are still disabled, but that doesn’t matter. If the DTC is lost, you can apply to have the RDSP extended for a period, but eventually. All grant & bond moneys from the past 10 years must be paid back, but the growth in the fund can be rolled into an RRSP (I believe, not sure on that one though).



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