A study finds that the Ontario government’s proposed provincial pension plan could cost Ontarians thousands of dollars each year.

The Fraser Institute study, Evaluating the Proposed Ontario Pension Plan, says the plan would cost individuals up to $3,420 a year or nearly $7,000 for a working couple. Details about the Ontario Retirement Pension Plan (ORPP) were introduced by the Liberal government in this month’s budget, which wasn’t supported by either the New Democratic Party or the Progressive Conservatives. The plan won’t go ahead unless the Liberals win the June 12 election.

The proposed ORPP will require workers to contribute 1.9% of their earnings up to $90,000, matched by a 1.9% contribution from employers. The ORPP would expand coverage to about three million workers.

According to economic theory and extensive literature on pension trends, the study says employers will cut future wages or other benefits to pay for their half of the mandatory contribution.

“Unless there’s an increase in productivity, employers can’t suddenly increase compensation to employees unless they raise prices in an increasingly competitive marketplace,” says the study’s author, Philip Cross, a former chief economic analyst for Statistics Canada. “However you slice it—lower wages and less hiring, or higher prices at the till—it’s bad news for Ontario workers.”

He finds that the plan is based on a fundamental faulty assumption: Ontarians don’t save enough for retirement. However, figures from Statistics Canada show that Ontarians have had one of the highest personal saving rates in the country over the past two decades.

“The best way to increase savings is to foster strong income growth, which allows both spending and saving to increase,” Cross explains. “Yet the proposed Ontario pension plan will further reduce household income, the amount people voluntarily save and their overall standard of living.”

Finally, he explains that the plan’s investments will be concentrated in fewer areas than individual investors would make on their own, and there’s an indication that investment decisions will be directed by what is deemed best for the province instead of for plan members.

“Its sheer size and concentration will leave the fund vulnerable to a spectacularly poor investment decision…potentially offsetting any gains made by low fund management costs.”

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Copyright © 2020 Transcontinental Media G.P. Originally published on benefitscanada.com

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Robert in Vancouver:

Another job killing, business crushing policy from a Liberal government that has ruined Ontario’s economy and turned Ontario into a have-not province.

Yet it looks like this same Liberal government has a good chance of being re-elected. What a shame.

Wednesday, May 28 at 12:53 pm | Reply

Derek:

Can anything from the Fraser Institute be trusted these days with their discredited research methodology behind all of their studies

Thursday, May 29 at 10:25 am | Reply

Judy Schulz:

We will downsize our small business and eliminate our employees before setting up mandatory pensions for them!

Wednesday, June 04 at 1:59 pm | Reply

John Hamlin:

Just another way for the Ontario government to get the last few pennies I have left from paying the extortion fees that WSIB has made law for all small business owner to pay for there insurance plan that I will never ever get to collect should I get hurt on a job. Time to close up shop it’s just not worth running a small business anymore in Ontario or in Canada for that matters.

Saturday, February 28 at 2:12 am | Reply

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