Canadian Personal Finance Blog

Archive for the ‘Pensions’ Category

For the Remembrance Day week, there was much to reflect on. We live in a great Country (Canada) and are lucky for those who have fought for us and those in our Armed Forces today. Thank You.

I was also excited to see that the Ottawa Public Library has updated their “Stone Knives and Bearskins” interface and are now testing a brand new interface which I like a great deal (and you can find me on their as bigcajunman as well). Try it out and tell the folks what you think of it.

From the Financial Blogosphere

Given the N.C.F.B.A. met this week, I always feel a level of rejuvenation in my blog, and also a level of confusion, given some of the topics that are discussed by some of the members are well over my head financially. I listen and attempt to learn as much as I can, and then go and read about the topics more (so for me it’s like going to a seminar on high level finance ideas).

• Michael James wrote about Veterans’ Pensions and just how little we pay permanently disabled soldiers and members of the military (shockingly low, but might be tax free).
• Speaking of disabilities the Canadian Capitalist wrote about The Sad Story of Nortel LTD Beneficiaries which is another scandalous issue. These folks are going to lose their benefits (or already have lost them), because of how Nortel ran their program. Read the posting, and then ask yourself how your company does Long Term Disability benefits.
• Soon to be Television Personality Preet at WhereDoesAllMyMoneyGo put up a useful video on What is a Mutual Fund for those wanting to learn more about how that investment vehicle works. Preet will hopefully soon be seen on the W Network on a weekly basis, stay tuned.
• Larry MacDonald (who promises to write a follow up one day of his successful book Nortel: Telecomm Empire) writes a useful posting on the Quotable Guide to Passive Investing where he gives you some quips from some very good books about passive investing.
• The Four Pillars asked Should the Government Bail Out Pension Plans? I think my answer is maybe, but they should definitely REGULATE them much more closely! What has been allowed to transpire at GM and Nortel is at least an abomination if not actually criminal.
• Gail Vaz-Oxlade tells you 8 Reasons Why You Don’t Save right on target as usual (wish she wasn’t sometimes).
• Promod at Riscario Insider write about Three Reasons Why Financial Literacy Eludes Us again, wish he wasn’t right.

Have a great weekend all, remember it’s time to put your Snow Tires on!

Given the recovery in the markets over the past little while it is not surprising to hear Pension funds claiming they are on the road to recovery, and now CPP claims their assets are up $11B in the first quarter of this year (which is good news). This kind of growth is needed given the losses most pensions took during the great Apocalypse of ‘08, however is the Canada Pension Plan going to be able to withstand the onslaught of retirees which will live much longer over the next 30 years?

“We are pleased with the $11.1 billion increase in the fund and the positive 7.1 per cent return for the first quarter,” CPP president David Denison said. “At the same time, the negative returns of our past fiscal year and the positive results of this first quarter both need to be viewed within the context of our long-term strategy. We continue to focus on delivering solid returns over the span of multiple years and indeed decades.”

Since the CPP folks have started investing they have managed about a 4.9% return on their assets (over 10 years) so that is a better thing, but the nagging questions are:

• Can the fund sustain and continue to pay out to the tidal wave of retirees coming in the next 10 years, or will the government be forced to change the system?
• What is the percentage of Canadians who will only be using the CPP for their retirement?

As I grow older this worries me more and more.

This is the one year anniversary of my lay off notice from Nortel. A lot has happened in the past year (unfortunately not a job offer for me, but I am still optimistic), that have me thinking that for something bad, it may end up being a good thing.

Relaxed

The atmosphere at Nortel had been such that since about 2000, there was a constant feeling of the Sword of Damocles hanging over you. I lived through about 16  lay off rounds in the various groups I had worked in, so the actual lay off was almost a relief in a very odd way.  My minister made that exact comment that since he had first met me every time he spoke to me I mentioned something about impending lay offs, so my eventual lay off was anti-climatic in a perverse way.

Severance Paid

From my calculations I was in the last group (or nearly the last group) that received full severance from Nortel. The people after me are on a long list of creditors who will be paid little or none of what they are owed (or were promised by the company). There are many very sad stories that I have heard from people I used to work with, and I count myself as very fortunate.

The latest stories are sickening to hear that they will be withdrawing payments to people on long term disability, as well as pulling their medical coverage. Hopefully there will be government assistance to these folks, but I am not optimistic.

Pension Losses

I suspect that Nortel’s pension debacle may only be the tip of the ice berg in corporate Canada, with Air Canada already having done this (and doing it again).  I took my pension money out of Nortel when I could, which in hindsight was a great decision but at the time it was more my lack of trust in the company that made me do it, not any great insight.

All pensions these days seem to be under pressure (even the Public Service pension lost $9Billion dollars this past year), which makes me wonder how the retirement of the Baby Boomers is going to go, and whether all pensions can deal with this huge out flux of cash from their reserves?

Reflections So Far

My real view of my lay off last year is that I have been very lucky, and I was lucky to have worked at Nortel/BNR for the time I did. The experience I picked up continues to get me job interviews, and I worked with many wonderful and amazing people, so even at times when I seem to be a “bitter former employee”, I am not, I am grateful for the experience and hope to soon find a new place to ply my trade.

Back to Stats Canada for another very interesting statistic, there are more Canadians in pensions as of January 1, 2008. This is a surprising number, but also an old number.

As of January 1, 2008, membership in registered pension plans (RPPs) in Canada amounted to 5.9 million, an increase of more than 140,000, or 2.4%, from the previous year.

Given the difficulties of a few large private pension programs (Nortel, GM, and Ford to name a few), my guess would be the number from January 1, 2008 to now is a big drop.  The whole business of private firms with pensions is becoming a bigger and bigger issue, given the liability this represents to these firms (Air Canada is talking about their pensions, AGAIN, as an example).

Will the defined benefit pension in the private sector be going in the same direction as the North American Auto Industry? Not sure, but it does show that the benefits package for today’s employee is changing.

Will the worker of today be able to retire? I keep asking this question, I think the answer is simple, the age of retirement is going to change from 65 to an older age (70 or 75).

Cell Phone News

With Rogers and Fido both confirming that they will have the new iPhone 3G S available the day they are available in the U.S. , which is interesting, if not a little expensive. The new iPhone has some interesting new features, but is still far too rich for my blood.

A more interesting report by TechCrunch (based on a report by Juniper Research) states that cheap phone set sales will be up by 22% by 2014 or over 700 Million units per year. That is even more interesting, more consumers are simply buying cheap phones (especially all over the world), instead of buying “Smart Phones”. I am not surprised by this data, but it is very interesting.

Cheap Phone Sales Graph

During a week where the federal government disclosed just how enormous the federal budget deficit will be, there were other topics written about by the Financial Blogging world, but this topic alone is a pretty hot topic. 

What could that kind of “money printing” cause in the economy? Jon Chevreau points out in the U.S. it could mean Hyperinflation on the Zimbabwean scale (at least in Dr. Doom’s estimation at least). 

Random Thoughts: Pensions?

• Michael James points out that not only is Nortel not paying severance and cutting their pension pay outs, they are reneging on work already done in Nortel Pensions and Paying in Advance.
• The Canadian Capitalist writes about the Major Changes in the Canada Pension Plan, which in some ways may be good, but are they?
• Preet at Where Does All My Money Go, points out there are hidden fees everywhere in Hard to Borrow Fees. 
• Canadian Financial DIY writes about our aging population and points out that 80 is the new 65 , yikes!
• The Four Pillars celebrated their 2nd blog Birthday, good for them, keep up the good work.
• Larry MacDonald asks about Falling House Prices and Banks, another interesting topic.
• Riscario Insider points out even Billionaires Need Government support.
• Gail Vaz Oxlade points out that spending Cash may cut spending in Cash versus Credit . 

Have a great weekend folks, hopefully the rain will stop, but maybe my grass needs it?