Ontario approves bill to create provincial pension plan starting in 2017

Ontario passed legislation Wednesday to create a provincial pension plan for more than three million people who do not have a workplace pension, despite critics' warnings it amounts to a job-killing payroll tax.

Workers will be required to contribute 1.9 per cent of their pay to the Ontario Retirement Pension Plan, to a maximum of $1,643 a year, which employers have to match for every employee.

"Over $3.5 billion will be invested in the fund each year," said Associate Finance Minister Mitzie Hunter. "Members of the plan will be able to have an income stream for life when they retire."

The mandatory contributions will be phased in over two years, starting with larger companies Jan. 1, 2017 before moving to smaller operations like convenience stores and dry cleaners.

Ontario wants to mirror the Canada Pension Plan as much as possible, and Hunter said the province still would prefer to enhance the CPP instead of creating its own plan. Contributions would be "locked-in" just like CPP contributions, prohibiting people from cashing them out before retirement.

Still in development

However, Hunter could not say when retirees could expect to start receiving benefit payments from the provincial pension plan.

"We're still actually developing details of the plan," she said. "So people will be making contributions to the plan, and that's the beginning."

Premier Kathleen Wynne has said the province had to create its own retirement plan for the more than two-thirds of Ontario workers who don't have a pension at work because the federal government refuses to enhance the Canada Pension Plan.

Business groups including the Canadian Federation of Independent Businesses and the Ontario Chamber of Commerce warned that forcing workers and employers to contribute to a provincial pension will drive up costs and result in fewer jobs.

"Only 26 per cent of businesses in Ontario believe they can shoulder the financial burden that would result from the ORPP," said the Chamber of Commerce. "If faced with mandatory increased contributions, 44 per cent of surveyed businesses indicate they would reduce their current payroll or hire fewer employees in the future."

Threat to jobs?

The Progressive Conservatives also said the provincial pension will end up killing jobs as businesses try to absorb the additional costs for each worker.

"The government's ORPP is a wide-reaching payroll tax that will negatively affect businesses across Ontario and drive jobs out of the province," said PC finance critic Vic Fedeli.

Hunter said the introduction of the ORPP on Jan. 1 2017 coincides with an expected reduction in Employment Insurance premiums by the federal government.

The New Democrats said a provincial pension plan is the "best option" for workers until the federal government can be convinced to increase CPP benefits for retirees.

"The ORPP has to be structured very precisely so that some day it can be folded into the Canada Pension Plan so that people can have substantial, secure retirement income," said NDP finance critic Peter Tabuns. "If we want to have pensions that are secure, protected and aren't going to be raided by corporations that have financial troubles, we need a centrally-run, publicly-owned pension plan."