More Pensions, New CTC, and #MoneyTalk

According to our friends at Stats Canada more Canadians are in Pensions (up by almost 1.2%), which really surprised me. This would suggest all this palaver and gum-flapping about Canadians not having enough money to retire was just Media over-reaction, however if you read the report a little closer, there is a telling statement:

Dangerous Pension Conditions Ahead

Dangerous Pension Conditions Ahead? More people using different kinds of pensions that is for sure.

In 2014, just over 4,380,000 employees were in defined benefit pension plans, down 0.5% from 2013, and down 8.3% from a high of 4,776,000 in 1992. Defined benefit plans accounted for 70.0% of employees belonging to an RPP in 2014, a drop from 71.2% in 2013, and down from over 90% in the 1980s.

So the Defined Benefit Pension Plan is slowly dying off (except in the Public Sector) and the Defined Contribution (and the hybrid mutations of that concept) are where there is growth. This makes more sense, most private sector companies cannot afford a defined benefit pension system (whether the Government can afford their pension system remains to be seen).

For those of us with kids, that aren’t making too much, the new Child Tax Credit (CTC) just kicked in. The good news it is tax-free, but if you make too much money, you get nothing. There is an old (but still helpful) video from Preet about this exact topic at the end of this article.

RESP Questrade Banner

My Writings for Week Ending July 22nd

In summer mode, I am actually accumulating more unfinished titles in my writing pile, but What is Couch Potato Investing? came up as a question a co-worker (who is an occasional reader) asked me what it meant, and to my surprise I have talked about the topic a lot, but I have never really given as simple overview of what it meant, so there it was. I have written about the concepts of Couch Potato investing, but this article let’s folks understand the basics (I hope).

A Money Thought

Given Mr. Trump is now the Republican Candidate for the President, I have been researching some of his more interesting quotes, I like this one from “Trump University Entrepreneurship 101: How to Turn Your Idea into a Money Machine”

If you’re not satisfied with the status quo in your career, read this book, pick one key idea, and implement it. I guarantee it will make you money. —Donald J. Trump

I am reading the book for free on-line, so I feel I am already ahead of the game (i.e. I saved money by not buying the book).

A Tweet to Remember

👇 For more great financial articles from this week click here 👇


My Biggest Purchase Was Not A House

The epiphany about my biggest purchase only hit me a while ago when I was chatting some co-workers and the topic was purchasing houses. Yes, I bought my house last century, so the price was not nearly as high as the prices are these days, but my biggest cash outlay was about 33% more than what I paid for my house.

Biggest Purchase

Now THAT is a big purchase

Just to be clear the biggest purchase was not a house, nor a holiday home (i.e. cottage) or anything like that (and no it was not a car or vehicle), and here is a final hint, it was not something I purchased a little at a time either (although you are heading in the right direction).

If you guessed it has something to do with retirement, you are correct, but I have not put that much money into my RRSP (nor do I have an RRSP that is that large (anymore)).

When I left Nortel I was lucky enough to have been at Nortel long enough, that my pension was actually worth a large amount of money, and thanks to my wife and Michael James I luckily removed my money from the Nortel Pension before Nortel declared bankruptcy. This left me with a very large Locked in Retirement Account (LIRA) and a smaller RRSP, which I then was able to buy into the Federal Civil Service Pension.  When I bought into the pension I paid for all of the pension (with no Government payment into it at all) for the period that I was allowed to transfer from Nortel (it is a program called Pension Buy Back).

This means that even though I have a federal pension, I paid for most of it (or more precisely, my defined benefit pension from Nortel paid for it), and this was my biggest purchase (ever).

The interesting part of the story is that the only reason I was allowed to buy into the Government pension was that I had:

  1. Started working for the government within 2 years of leaving Nortel
  2. Nortel’s pension is an “accredited pension plan” that the Government allows for transfer of funds and time from and into the Government Employees Pension plan.

I was very lucky that I qualified for part (1) of that statement (i.e. joined government within 2 years after being Laid off from Nortel), so again I fall bass ackwards into a good decision.



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). (Remember previously I did ask Do you have a Pension?)

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.



Best Financial Decision Ever

Whilst wandering through my massive archive of older articles, I tripped across Take the Money or Leave It? which I wrote about a month after I got laid off from Nortel, which ended up showing the Best Financial Decision I had made (ever0.

best decision

Image courtesy of Stuart Miles at

In that article I mused the following interesting question (remember this was 2008 during the great crash):

The options I have are:

  1. Leave my money in my former (or soon to be) employer’s pension scheme and start drawing from it at either age 55 or later.
  2. Take the money out and put it into a Locked In Retirement Account (LIRA), or at least the portion that the government allows.

As background my current employers pension plan is under funded, by a fairly large amount. I also have passed a point, so that I can draw from the pension when I am 55.

Thanks to Mrs. C8j, Michael James and a little common sense on my part I ended up doing the second option and it was the best decision (read luckiest)  I ever made due to the fact that:

  1. Nortel’s Pension plan was even more under funded than anyone knew and it has serious issues paying out these days. I kept hearing that the Ontario Government had “insurance” to back up the pension, but given the money I took out that “insurance” would not have covered the amount I should have been paid. I also kept hearing “there is no way the government would let Nortel and/or its pension fail”, I think we know what happened there as well.
  2. The money I received went into an LIRA in December 2008, when stock prices were the lowest, and it grew a great deal, until I took it out to buy into my current employer’s pension plan. Again, blind luck and no great “market timing” strategy on my part, simply me needing to buy when the market is lowest.

This shows that many financial decisions cannot be evaluated as being “Good” or “Bad” immediately, sometimes it takes a while to realize it was the best decision, or a massive blunder.


CPP Splitting A Different Process

One of the important things that I learned on my “so you think you can retire” course last week was that if you wish to split your Canada Pension Plan benefits it is a very different kettle of fish than if you wish to split your Company Pension Plan benefits.

A while ago, it was decided that a couple can share Pension income from a company pension plan, thus lowering the effective tax rate on the pension income.  For those with private pensions this was a big deal and could mean a large tax savings for retirees.  To do this you simply submit a T1032 Joint Election to Split Pension Income and away you go (saving tax money hopefully). If you don’t want to do it the year afterwards, you simply don’t submit this form.

Splitting CPP benefits is a very different kettle of fish.

You must submit forms to Service Canada asking to split your CPP benefits with your spouse (or common law partner), and both spouses sign the forms to get this all put in place, relatively straight forward, just a little bit of government red tape (or so you might think).

If you wish to stop sharing benefits with your spouse, both folks that signed the forms to set up the sharing must agree and sign the forms to stop doing this. Doesn’t sound like much, but if you become estranged with your spouse for some reason and don’t wish to share your CPP benefits with them, they have to agree to this as well.

Pensions and Divorce is a very complicated issue, but not just before retirement.

Another important thing to check out if you are lucky enough to have a Private Pension is how does your Pension Plan deal with the following interesting issues:

  • Death of the Pension holder. Typically there is a survivor benefit, but what else? Does the surviving spouse get medical benefits? How big is the survivor benefit? 
  • Separation of the Pension Holder from their spouse. Remember separation is not the same as divorce. If you get separated, go live common law with someone else and then pass away, who has rights to the Pension? Better go figure that one out.
  • What happens if the pension holder dies and there are dependent children, do they receive any survivor benefits?

Lots of interesting questions to go figure out, as having a Pension is a massive benefit for your retirement planning, you would do well to understand all the “ins and outs” of your pension program.

Thanks to Jim Yih also, for his post Differences Between Personal Pension Splitting and CPP, which I cribbed some information from.


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