Managed Money Reporter Newsletter — Issue 280, May/June 2014

Editors: Carl Spiess & Allan McGlade

Featured Articles

The Pension Issue

Carl Spiess

By Carl Spiess, CFP, CIM, FMA, FCSI, MBA

With all the media recently about Canada's "pension crisis", we thought it would be good to have an article to help answer some questions you may have.

Public Pensions

First, we all contribute to Canada Pension Plan (CPP). This plan is well funded and is anticipated to be actuarially sound out to year 2075. We can also expect (means tested) income in retirement from Old Age Security (OAS). For more information on these base plans visit:

Private Pensions

Depending on your employer, you may be in a Defined Benefit (DB) or Defined Contribution (DC) pension plan. Most public sector employees (94%, in fact) are in Defined Benefit pension plans which promise that a percentage of your employment income will continue into retirement (e.g. 2% for each of 30 years of work = 60% pension).  Most private sector employees with a pension these days are likely in a Defined Contribution pension plan, where employer and employee contributions accumulate and can be used to purchase a retirement income stream depending on the employee's needs. Other private sector employees may be offered more flexible Group Registered Retirement Savings Plans (GRSPs) or Deferred Profit Sharing Plans (DPSPs) which work just like Defined Contribution pensions.  However, only ¼ of all private sector employees are covered by an employer sponsored pension plan. See:

Here's a quick ScotiaMcLeod primer on how DB and DC pension plans work and your options for retirement income.

The very good news is that with recent strong markets, the assets held in DB pension plans mean that most plans are nearly fully funded (the median DB plan was 100% funded in 2013 on a going concern basis).  Like CPP, most DB plans now have enough in assets and incoming contributions to be able to pay their expected obligations:

And members in DC, GRSP & DPSP plans have seen strong market returns over the last few years.

What to do - too many options?

So are Canadians saving enough?  While RRSP contribution rates have fallen over the last 10 years, one in three Canadians now has a Tax-Free Savings Account (TFSA). And many Canadians expect to use part of their real estate holdings to cover retirement expenses. So some would argue that the focus on pensions is a bit overdone.

Our governments are also implementing new plans to help encourage saving. Ottawa has introduced the Pooled Registered Pension Plan (PRPP) and several provinces have adopted that legislation. Ontario was pursuing a different strategy to help people save more. Stay tuned to future issues of this newsletter for definitive news on that as it becomes available.

Recently there was talk of a new "target risk" pension plan structure from Ottawa. Yes, this would be a Target Benefit Plan (TBP) that could come from a Multi-Employer Pension Plan (MEPP), or a Shared Risk Plan (SRP) from a Jointly Sponsored Pension Plan (JSPP). Really, with all these acronyms, it is getting complicated now.

And if you want, you could always consider an Individual Pension Plan (IPP).

We hope you like some of the links in this article and welcome your comments. We are very concerned that there may be too many kinds of plans for employees to actually understand the impact a particular kind of plan will have on their retirement options, or even know how to apply for all their various benefits. But it is our business to help make sense of it all and we'll be here to help you when you need us!  Just like in the Scotiabank Second Opinion Ad:


Recommended Reading

Bacon & Maple Syrup

We thought the above piece was a fun and lighter read than Dynamic's normal market outlooks, like:


Shari'ah Compliant Investment Options

For our clients with specific investment objectives and philosophies, we've always had the widest range of options. We are pleased to note that we have a sub-section of our Socially Responsible Fund listing which includes Shari'ah compliant investments.  Please see:


Fund Fees Going Down

There is a bit of a price war going on that is benefiting our clients. Exchange Traded Funds (ETFs) which we use for certain client portfolio strategies are becoming even less expensive. iShares recently announced a significant price reduction on their core series of ETFs which is largely a response to the entry of US fund giant and low cost leader Vanguard in Canada.

And while mutual funds are a different investment structure, many mutual fund fees are going down too. Recently EdgePoint noted that their F class HST exempt fund edged (pun intended) below 1% MER.

Stay tuned for the next issue of the MMR which will have even more information on fund fees.  Please contact us though in the interim if you have any questions at all about the fees on your investments.


Team News

We are excited to announce that Debbie Ann Espiritu and her husband Erick have added young son Gabriel Evan to their growing family. Debbie is now on maternity leave.

Claudia Ochoa has recently returned to the team from her maternity leave.

Yash Patel has joined us as a summer intern.

And in other ScotiaMcLeod news, Fred Ketchen, whose baritone voice and plaid jacket graced radio and TV in recent years, is retiring after 57 years with ScotiaMcLeod! What a career and fitting end to our pension issue of the MMR. (The photo is of Fred presenting Carl with a McLeod jacket in 2004.)


Keeping in Touch

With the pending Canadian Anti-spam Legislation (CASL) due July 1st, this will be our last email newsletter in this current format.  We will be using a new email service for our Back to School issue in August. In the interim, our friends and contacts who receive this newsletter and other information from ScotiaMcLeod will be receiving "opt-in" emails. For our existing clients, you should continue to receive our communications and will as always have the option to opt out. If for some reason it turns out that we don't have your most current email address (or salutation) in our new system, please let us know and bear with us as we transition under the new rules.


Recommended Link of the Month

The Canadian mutual fund industry recently celebrated a major milestone.  Canadian investors now hold over one trillion dollars in assets in mutual funds.  Here's a link to the article:

And the Investment Funds Institute of Canada (IFIC) has a wealth of other information on investing.



Contact Us

T.  416.863.RRSP (7777)
F.  416.863.7479

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