The Government of Ontario is moving ahead with its mandatory provincial pension plan, the Ontario Retirement Pension Plan (ORPP), after the provincial budget received royal assent last week.
“The federal government has consistently refused to commit to an enhancement of the CPP, so Ontario is leading the way with the ORPP,” says Associate Minister of Finance Mitzie Hunter. “Without help, that future is discouraging for many, especially since two-thirds of Ontario workers don’t have access to a workplace pension and many are unable to save enough on their own to provide for a secure retirement.”
The province says the ORPP will:
Provide a predictable stream of income that is indexed to inflation and paid for life in retirement.
Be mandatory for the more than three million Ontarians without a workplace pension plan, and require equal contributions from employees and employers.
Operate at arm’s length from government and be responsible for managing investments associated with annual contributions of approximately $3.5 billion.
Support long-term economic growth as pension payments from the ORPP would help people maintain their standard of living in retirement and continue spending.
Be developed in consultation with pension experts, business, labour, individuals, families and communities across the province in order to ensure that a broad range of perspectives is heard.
The ORPP aims to provide a replacement rate of 15% of an individual’s earnings, up to a maximum annual earnings threshold of $90,000.
Contributions will be shared equally between employers and employees and not exceeding 1.9% each (3.8% combined) on earnings up to a maximum annual earnings threshold of $90,000. The ORPP maximum earnings threshold would increase each year consistent with increases to the CPP’s maximum earnings threshold.
Since the provincial plan is intended to assist individuals most at risk of undersaving, particularly middle-income earners without workplace pensions, those already participating in a comparable workplace pension plan would not be required to enroll in the ORPP.
The ORPP would be introduced in 2017 to coincide with the expected reductions in Employment Insurance premiums.