Ontario small business owners are feeling vulnerable to the introduction of the Ontario Retirement Pension Plan (ORPP).
Meridian’s 2014 Small Business Banking in Ontario Study, conducted by Leger, finds that 77% of small business owners believe that managing the introduction of the ORPP could be their biggest business challenge to date. Further, 41% see the ORPP as a barrier to their business growth in 2015, second only to economic uncertainty (60%).
“While these small business owners have weathered many storms since the recession, being prepared for the unexpected has been the key to their success,” says Jeff Brown, vice-president, small business, at Meridian. “That approach will ultimately help them address the implications of the ORPP once it comes into effect in 2017.”
Introduced earlier this year by the provincial government, the ORPP is a mandatory provincial pension plan intended to complement the Canadian Pension Plan to help Ontarians save for retirement.
Under the plan, employers would match an employee’s contributions of 1.9% per year in earnings up to a $90,000 income maximum. Employees already participating in a similar workplace pension plan and those working in federally regulated industries are exempt from contributing to the ORPP.
Although 61% of small business owners agree that they would be in favour of the ORPP if they themselves were employees, 91% express concern about the ORPP chipping into their profits. In fact, half of small business owners surveyed do not feel their businesses can remain at their current capacity while contributing to the ORPP.
One-half (51%) of Ontario small business owners report that they feel a responsibility for helping their employees build their nest eggs. Yet, at the same time, 61% of small business owners worry that the implementation of the ORPP may negatively impact their own retirement plans.
“With a large number of small business owners in Ontario approaching retirement, it is going to become even more critical for them to understand how to best navigate the ORPP in order to reach their own retirement goals,” he explains.
Small business owners do see the value of expert advice, with 64% citing they will likely seek the advice of a professional when it comes time to implement the ORPP.
“There may be a number of options available to small business owners in Ontario that would effectively reduce the impact of the ORPP,” Brown says. “In fact, it may be more cost-effective to offer employees a different type of pension plan, such as a pooled registered pension plan or a group RRSP, rather than sign up for the ORPP.”
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