Ontario Retirement Pension Plan: Who loses, who wins

While the political battle rages over the Ontario Retirement Pension Plan, there may be some real losers and winners in the proposal.

Small businesses may take a hit now, but middle class workers could welcome it down the road

Ontario Premier Kathleen Wynne and Finance Minister Charles Sousa are two out of the three people being taken to court by CUPE Ontario. (Aaron Vincent Elkaim/Canadian Press)

If you've heard anything about the proposed Ontario Retirement Pension Plan, it's probably that Conservative Leader Stephen Harper and Ontario Premier Kathleen Wynne are publicly fighting about it.

While there's no love lost between these two, there may be some love in the ORPP for Ontario's future pensioners – and less so for others.

Under the Ontario pension plan, which was approved in legislation in April, workers will have to contribute 1.9 per cent of their pay, to a maximum of $1,643 a year, which employers will have to match for every employee. Earnings above $90,000 will be exempt from ORPP contributions. 

The mandatory contributions will be phased in over two years, starting with larger companies in 2017 before expanding to include medium-sized companies a year after that, while small operations like convenience stores and dry cleaners will be on a two-year delay.

Harper has slammed the idea as "an enormous tax increase," saying he is "delighted" that Ottawa's refusal to help administer the new pension plan will make it more difficult for Ontario to implement it. 

Mandatory contributions to the Ontario Retirement Pension Plan will be phased in over several years, starting with larger companies in 2017 before expanding to include medium-sized and small companies in the two years after that. (Canadian Press)

Harper said it would be bad for the economy and bad for jobs, noting small businesses have warned they'll have to cut jobs to meet the extra costs of a new pension plan.

Wynne blamed Harper for adding to the "high anxiety" felt by voters in Ontario over retirement security.

As politicians battle it out in the run-up to the federal election, who are the real winners and losers of the Ontario Retirement Pension Plan?

The losers:

People who want to opt out

In the U.K., the National Employment Savings Trust gives workers the right to opt out of a workplace pension set up by the government.

"It gives employees an opt-out option, which means if you really don't want to do this, you don't have to," said Keith Ambachtsheer, director emeritus, Rotman International Centre for Pension Management, University of Toronto. "I like that feature and I wish that we would be doing that here."

One of the complaints about Wynne's proposal is that some people who aren't exempt from this forced saving program will be given no other option if they don't want to participate.









Barbara contributes
$2.16 per day


Bonnie contributes
$3.46 per day


Bernice contributes
$4.50 per day

Employer Contributions

Barbara's employer contributes
$2.16 per day

Employer Contributions

Bonnie's employer contributes
$3.46 per day

Employer Contributions

Bernice's employer contributes
$4.50 per day

Retirement Benefits 

Barbara gets
$6,410 / year
for life

Retirement Benefits 

Bonnie gets
$9,970 / year
for life

Retirement Benefits 

Bernice gets
$12,815 / year
for life

"There are other people who participate in their retirement savings in different ways who aren't being exempted and what we're going to see happen is people will have to cut back the contributions they make to existing retirement plans in order to come up with the money for this," said financial author Gail Vaz-Oxlade.

However, by making the program mandatory, the government can run a large-scale pension plan at the lowest overhead, said Lauchlan Munro, director of the University of Ottawa's School of International Development and Global Studies.

Workers making minimum wage 

"The closer you are to the poverty line the harder it will be to afford," Munro said of the ORPP. "It is an issue."

The general minimum wage in Ontario is currently $11 an hour, set to rise to $11.25 in October.

"You can't make a living on minimum wage and save for retirement. You can't save if you're trying to put a roof over your head and food in your children's bellies," said Vaz-Oxlade. "So what [Wynne] should be focusing on is making sure everyone has a livable wage. A lot of people in Ontario right now don't have the resources to meet their needs."

Vaz-Oxlade suggests empowering people to plan for their future by teaching them to become financially literate and to make wise decisions about saving, rather than leaving it to the government.

Small businesses with tight profit margins

Amir Rahim, who owns Backdrop Food and Drink in Ottawa, is not sure his business can handle the implications of the ORPP.

"I'm working on some really tight margins. If my wage costs went up another 1.9 per cent, for example, I would be losing money right off the bat," he said. 

The Canadian Federation of Independent Business says most small businesses in Ontario are against the proposal.

"Our members are telling us they are looking at cutting the number of positions they have, or at least not hiring as much as they would have liked to," Corinne Pohlmann, CFIB's senior vice-president of national affairs, told CBC News Network.

She said the ORPP could discourage entrepreneurship.

"This will add to the decision making in Ottawa for a lot of small businesses about whether or not they want to open or even build a business here in Ottawa versus on the Quebec side or in another province."

However, Munro said, the ORPP is designed to help the middle class, not hurt businesses. "[Businesses] said the same thing about the CPP. This is modelled closely after the CPP. Any time someone comes along with such a proposal, some object."

The winners:

Businesses that plan early

Wynne's government has said it is slowing down the phase-in of the controversial ORPP to ease the transition for small and medium-sized businesses.

"It's a modest pension," said Ambachtsheer. "When you think of it from the employer point of view, 1.9 per cent of pay phased in over a three-year period, that's not a huge bite. I think it's an overblown issue."

Employers generally try to keep their workers' salaries up to date with inflation, he said. 

"Maybe some of those inflation-related updates have to go towards the pension plan if the employer really can't do both."

"There will be a few businesses with small profit margins that might suffer, but the claim that this is a massive job killer, I don't think so," Munro said.

Middle class workers not saving because of inertia 

People value today more than they value tomorrow. That is the behavioural research logic on which the ORPP is based, said Ambachtsheer and Munro. 

"It's inertia. The argument the government would make is that this is a way of overcoming that inertia," Ambachtsheer said. "That you're helping people do what they should already be doing on their own."

Status quo

There are many people that the ORPP won't affect at all. 

Retired Canadians and those approaching retirement age will not be affected, and more than one million workers in Ontario who are self-employed will also not be required to pay into the ORPP.

Employees who have workplace pension plans "comparable" to the ORPP will not be eligible. Many of those are public sector employees with defined benefit plans, which pay a benefit for life at retirement.

With files from CBC's Adrian Harewood and The Canadian Press


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