As Ontario moves forward with its mandatory provincial pension program, it should use Australia’s DC system as a model instead of the Canada Pension Plan (CPP).
This is what a new study by the Fraser Institute argues.
While the Ontario Retirement Pension Plan (ORPP) is now being styled after the CPP, it’s better to imitate Australia’s DC-style individual retirement saving accounts, which resemble RRSPs and offer more flexibility, the paper argues.
Read: CPP enhancement, ORPP could reduce voluntary savings: Report
For example, Australians can choose how to invest the money in their retirement accounts, which are fuelled by mandatory employer contributions (currently 9.5% of eligible earnings), based on their personal preferences and circumstances.
They can withdraw money from their individual accounts before retirement for medical emergencies or during times of financial hardship.
Read: CARP wants Ottawa to reverse decision to obstruct ORPP
Also, all contributions and earnings in the Australian accounts accrue directly to the individual. And upon death, account balances can be fully transferred tax-free to a dependent.
These benefits aren’t available in the CPP model.