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Email this12:24 pm
April 6, 2013
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Very few people would be aware of the Saskatchewan Pension Plan unless perhaps they lived in SK, and even then I'm not sure. I don't know if it existed in 1987, and I certainly didn't then. I believe you don't have to be a resident of SK to participate, but that needs to be checked. By the time I found out about it, it was not worth my while to participate.
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I had a brief look. I don't think you missed out on much from the Saskatchewan Pension Plan.
The SPP is open to everyone between 18 and 71 of age.
It looks like an RRSP where one voluntarily locks in under Saskatchewan rules and has just two choices of investments. It's a defined contribution pension plan, with no matching contributions from an employer or any government. The amount of annuity at retirement is not guaranteed.
This is from the Contribution Fund's Statement of Investment Policies and Goals, section 1.03 (Plan Profile):
The Saskatchewan Pension Plan is unique in its design. Non-Retired members have two options in which to invest their assets, the Balanced Fund and the Short Term Fund. These two funds are collectively known as the Contribution Fund. Assets of retired members are held in the Annuity Fund. This policy sets out the guidelines for management of the Annuity Fund. A separate policy governs the Contribution Fund.
The Annuity Fund holds assets transferred from the Contribution Fund at retirement. Assets in the Annuity Fund are used to provide annuity payments to retired members. The amount of the annuity is dependent on the balance in the member's account at the date of retirement, interest rates at the date the annuity is purchased, the type of annuity selected, and life expectancy of the member and the member's spouse, if applicable.
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Membership in the Plan is open to all individuals between the ages of 18 and 71. Members are allowed to contribute a maximum of $2,500 per year, subject to an individual's available contribution room, and transfer in up to $10,000 from other registered retirement vehicles. The average age of active members is 50 years, with 44% under the age of 50 and 58% under the age of 55.
Contributions and related earnings are locked in to age 55. Retirement options include purchase of an annuity from the Plan or an external provider or members may transfer assets to another financial institution for the purchase of a Prescribed Registered Retirement Income Fund (P-RRIF) or a Locked-in Retirement Account (LIRA). Benefit payments from Annuities must commence and transfers must take place no later than age 71, and can commence as early as age 55. The amount of funds available to a member to purchase pension benefits at retirement is equal to cumulative contributions and accumulated earnings.
I don't see any advantage over opening my own RRSP account and investing in a balance fund and GIC's. I wouldn't have to deal with the locked-in restrictions.
3:45 pm
October 21, 2013
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I am not surprised you find it less than ideal.
I only mentioned it (in the other thread) because it might possibly be an alternative as to what to do with money taken from another pension plan. Once I realized it would not suit my time frame, I didn't really look any further.
It does, as they say, occupy a unique position on the investment landscape, for what it's worth.
It may not have the breadth of investment options that a large pension fund has.
Locked-in is not necessarily bad. It offers protection for spouses, and better protection from creditors than other investments, not to mention protection from oneself if one were about to make an ill-considered withdrawal, which you can do with RSPs. It is actually a truer pension plan than an RSP/RIF.
8:42 am
April 6, 2013
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SPP is a possibility for money from another pension plan.
I think the SPP can only accept locked-in funds that are from a federal pension fund or a Saskatchewan pension fund. The transfer form has this line:
5. SPP has to continue to administer $________ as a locked-in amount as required by the Pension Benefits Standard Act or The Saskatchewan Pension Benefits Act 1992.
I think the two acts mentioned are the federal Pension Benefits Standards Act, 1985 and the Saskatchewan one.
9:29 am
October 21, 2013
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Yes, that's what I meant.
9:35 am
April 6, 2013
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I would accept having money locked-in if it were extra money an employer provided for retirement purposes. An employer adds $1 for each $1 I contribute, provided the $2 is used for retirement.
Otherwise, if it is just my own money, then it really depends on how much value one puts on the creditor protection and the protection against one's self.
There isn't much value for me. I don't have much debt. I don't seem to have impaired financial self-restraint.
5:00 pm
October 15, 2015
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I've opened an SPP account. From what they told me they are only charging .5% for the annuity. My understanding is this is a lot cheaper then what would generally be charged for an annuity. I though you are usually charged 3 or 4%.
You can also contribute by credit card. That means you get rewards, rewards of even 1% would cover the mer.
5:55 pm
December 12, 2009
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Loonie said
Locked-in is not necessarily bad. It offers protection for spouses, and better protection from creditors than other investments, not to mention protection from oneself if one were about to make an ill-considered withdrawal, which you can do with RSPs. It is actually a truer pension plan than an RSP/RIF.
I thought it was a defined benefit pension plan, similar to CPP. Is it a defined contribution one? I believe I did know it was voluntary for Saskatchewan residents and, presumably, if you move away from Saskatchewan, your funds can be left in the plan, but you just can't contribute? What does the Saskatchewan government and/or your employer contribute on your behalf?
I agree that locked-in plans aren't a bad thing, they keep funds locked up from people who like to "raid" their retirement funds early. What do you mean by protection from spouses, though? Do you mean subsequent spouses? In some ways, I say this is a negative as the original spouse now has to sign a form relinquishing their beneficial interest in it. 🙁
Cheers,
Doug
9:42 pm
October 21, 2013
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That post was quite a while ago, so I couldn't be sure what I was referring to at this late date without doing more legwork. There is probably a measure which prevents the plan holder from cutting out the spouse by a unilateral decision.
9:58 am
September 11, 2013
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Doug, Norman1 has answered most of your questions in post #1. Any Canadian can participate, your money is locked in until age 55, you can (depending on your RRSP room) contribute up to $6K/year, and you can also transfer up to $10K/year to it from other registered pension funds you have elsewhere.
christinad has indicated some positives, otherwise I agree with Norman1, I don't see any reason to participate. The term "Saskatchewan Pension Plan" suggests a similarity with other gov't defined benefit plans like CPP, as you mentioned, Doug, so to me the name is a bit misleading - it's basically your own RRSP account that just you contribute to and then draw pension income from it later based on the amount your money's grown to in the interim.
9:32 pm
March 11, 2018
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It was established in the 80s and if i recall correctly...at the start the sask government did contribute some money to it for clients. Then the money ran out and then it was just what the client contributed. It was for years limited to 600 dollars a year for some reason which inflation quickly made a farce of. It then went to 2500 dollars a few years ago and then this year to 6k. I think it worth considering. Professionally managed money for cheap and the points on the contributions can add up. But of course it depends on your situation.
6:21 am
September 11, 2013
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Pipersierra, I agree, and if you're looking for "professionally managed RRSP money for cheap", examples of other options (with more fund choices than just one) would be opening an RRSP account at a discount broker and buying one or a few of their lower-fee balanced funds, using Tangerine's selection of 5 RRSP funds (fees about 1.07%), or opening an RRSP account with one of the lower-fee fund companies like Mawer (Balanced Fund has .92% annual fee). But you're right, no points!
8:31 am
April 6, 2013
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christinad said
I've opened an SPP account. From what they told me they are only charging .5% for the annuity. My understanding is this is a lot cheaper then what would generally be charged for an annuity. I though you are usually charged 3 or 4%.
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If those are MER for the annuity pools, then they are not as important as the amount of the monthly annuity payments one will receive.
The SPP annuity pool is just bonds. The return is going to be quite low. That could result in lower monthly annuity payments compared what one would receive if one transferred the money out to an insurance company annuity.
Annuity rates can vary quite a bit between the different insurance companies. Currently, the no-guaranteed-minimum life annuity for $100,000 premium for a 65-year-old single male is from $504.66/month to $545.23/month.
I quickly looked at the SPP web site and didn't run into any indication how much the SPP annuity for the same would be.
3:02 pm
October 15, 2015
Online
My understanding is that insurance companies charge quite a hefty commission on annuities that the saskatchewan pension plan doesn't charge. Surely that should be taken into account? As little i know about annuities i know that. Insurance companies are selling annuities for a profit, unlike the saskatchewan pension plan. In any event i am only saving a small amount. I plan to use it for some fun money in retirement.
Good point about return being low. The othet advantage is i think most annuities you need a mininum of 100,000 to buy an annuity with this plan there is no minimum.
6:50 pm
April 6, 2013
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It is up to 3% for an ordinary life annuity according to GetSmarterAboutMoney.ca: Annuity fees.
It is really a matter between the insurance company and the agent. Like the GIC from a broker, the commission and other costs are factored into the annuity quote.
If the quote is $400/month, then the annuitant will be receiving $400/month, and not $400/month less the commission and servicing fees.
I wouldn't rely too much on the for-profit/non-profit standing of the annuity issuer. I've seen cases where a non-profit FI was offering worst rates than the for-profit ones.
The annuity rate does depend on the lifespan of the pool members. A pool with members who, for some reason, don't survive past age 88 will pay more than one where everyone seems to make it to 95. 
When the time comes, I'd shop around to make sure the SPP annuity offered is competitive.
8:35 pm
October 15, 2015
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Thanks for the advice. My saskatchewan annuity will be less than $100,000 so insurance companies most likely won't deal with me. I have a different mentality then most of the people on this board because i'm also concerned with the enjoyment the money will give me along with my savings rate instead of just the highest return. I feel like saving by credit card will increase my savings rate and having a small pension for treats will increase my enjoyment. Thats enough for me. If i need to i'll buy a separate annuity but i'm not sure how i'll feel about plunking down $100,000 all at once which is another advantage to saving the money gradually.
Edit: I just did some research and it appears 50,000 in many instances is the lowest.
10:58 pm
October 21, 2013
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The high fees you are thinking of might be for segregated funds, which are also an insurance company product and are sometimes used as part of a retirement income strategy.
9:04 am
October 15, 2015
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I've done a lot of readings on annuity and they have high fees too. I've been interested in them as a single person who doesn't need to leave a legacy. The other advantage to the pension is as the funds are locked in, you won't be tempted to tinker with them. As I can visualize what the pension will be for, this motivates me to save. Unfortunately as i'm 45 I don't think I will save a lot as I am also focused on my other rssp. I also don't feel very comfortable with bonds and the balanced fund has a 30% bond component. Best to keep it small.
https://www.getsmarteraboutmoney.ca/plan-manage/retirement-planning/annuities/annuity-fees/
6:56 am
October 15, 2015
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I'm sorry i gave misinformation - you can get an annuity less than 50,000 but probably not with a bigger issuer. You can get a different annuity through a PRPP option. I'm not sure this option is available across canada. Its available in BC.
7:45 am
April 6, 2013
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I think the commission can be high when one is convinced to also buy extra "options" on the annuity.
I've read about a money-back option which returns the original annuity capital back on death. Essentially, it is a life insurance policy with the annuity.
The salesperson could also steer the retiree from a basic life annuity to another product with a higher commission that looks like an annuity. They look like seg funds. Instead of a guaranteed value after ten years, there is a guarantee of a certain monthly, quarterly, or annual withdrawal for life regardless of the performance of the underlying investments.
6:28 pm
October 15, 2015
Online
Here is a thread on financial wisdom forum
http://www.financialwisdomforu.....58#p612758
where a person with an SPP pension says what their monthly pension is and it is higher then other annuity quotes.
Please write your comments in the forum.