Protecting your Pension

Is Ottawa paying attention?

Article By: Gordon Pape

A few weeks ago, I wrote an open letter to Prime Minister Stephen Harper in which I encouraged his government to move quickly to address the serious issues facing current and future retirees and, in particular, the looming crisis in our private pension sector.

I certainly did not expect any quick reaction from Mr. Harper – he has plenty of other matters on his plate right now. Rather, I hoped to sow some seeds of concern among politicians and the public that might lead to a higher prioritization for these issues in the coming months.

Since I wrote that letter, two new developments have occurred that underscore the need for new policies to be introduced before the huge wave of baby boomers leaves the labour force – and remember, the leading edge of the boomers turns 60 this year.

First, health care benefits for retirees, an issue which has been increasingly in the news. Hewitt Associates, a highly-respected human resources company with international operations, recently released the results of a survey it conducted among 218 Canadian companies that now offer post-retirement health benefits plan. Hewitt found that 57 per cent of the firms plan to reduce these benefits over the next three years. Another 4 per cent said they will eliminate them entirely. Almost all cited the rising costs of health care as one of the main reasons for the move.

“The affordability of post-retirement health care benefits weighs heavily on the minds of companies,” said Naveen Kapahi, a senior benefits consultant in Hewitt’s Vancouver office. “Escalating health care costs, combined with the economic and political changes currently under way in Canada, will force many to actively look at strategies beyond traditional cost-shifting to manage rising health care costs.”

These are expected to include reduction in total coverage, stricter eligibility requirements, and increased cost sharing by retirees. In short, retirees will have to pay more of their personal health care costs in the years ahead than they expected, or budgeted for.

We recently saw an example of this in the U.S. where General Motors announced that it will cut health benefits for retirees in an effort to reduce costs. GM hasn’t done this yet in Canada but it appears to be only a matter of time.

Switching to the pension plan problem, there was a little-noticed court decision in New Brunswick that could turn out to be a milestone in the battle over retiree rights. Citing Charter issues, a judge granted a temporary injunction on Feb. 28 that stops the New Brunswick government from arbitrarily redistributing the assets of an underfunded pension plan set up for workers of the now-closed St. Anne Nackawic pulp mill.

The action, launched on behalf of 250 former mill workers who are paying the fees out of their own pockets, aims at overturning a provincial law which would have the effect of cutting the pensions of Nackawic retirees by anywhere from 27 per cent to 35 per cent. That money would be redistributed to employees who were under 55 at the time of the closure.

“It would mean that some people would lose their cars and maybe even their homes,” Craig Melanson, himself a retiree and spokesman for the group, told me. “The judge agreed, saying it would cause ‘irreparable harm’ to pensioners and violate their Charter rights.”

This is a real David versus Goliath battle: a small group of retirees from a town few people have ever heard of taking on a provincial government. So far the underdog is winning but this fight has just begun and it could conceivably end up at the Supreme Court of Canada a few years from now.

Given the large number of underfunded pension plans in Canada, the Nackawic fight may be just the start of a long series of political and legal battles. That’s why I believe it’s important to tackle these issues now, before they explode in our faces. Let’s hope someone in Ottawa is paying attention.

This article originally appeared in the Internet Wealth Builder, a weekly e-mail newsletter that provides timely financial advice from some of Canada's top money experts. For more information about becoming an Internet Wealth Builder member, go to http://www.buildingwealth.ca/promotion/50plusproducts.htm

Income Tax time is running out

If you have not collected all of your tax slips yet, here is a good method for getting ready to file.


Sympatico / MSN's tax preparation checklist
Posted 2/2/2006

By UFile.ca

We all know that the hardest part of filing your tax return can be pulling it all together. To help you out, we have put together this handy checklist of all the things to do to get started filing your tax return with UFile.

1. Collect all your tax slips. Tip: Look in all the spots where you normally put important papers that come in the mail.

2. Separate your tax slips according to the name appearing on the slip: yours, your spouse's, your son's, your daughter's, etc.

3. Organize them within those piles according to the type of slip: T4, T5, charitable donations, etc.

4. Make sure you know everyone's social insurance number. (Yes, even the kids', who should have a SIN so you can open an RESP for them if you haven’t already.)

5. Consider expenses for which you don't get a slip (e.g. your safety deposit box).

6. Tally up your medical expenses. It’s a good idea to make a list. Sort them by date, and consider using a non-calendar year-end in order to benefit from more medical expenses in a given 12-month period.

7. Finally, pull out last year's tax returns and assessments and find out what deductions you’re able to carry forward. This includes items such as your RRSP deduction limit, charitable donations carryforwards, medical expenses -- if you don’t claim them in the calendar year – as well as unused home office expenses for SOHO folks. Tip: If you used UFile last tax season, you will find this carryforward information waiting for you when you return this year.

Now for the easy part: Sign in to Sympatico.MSN Tax powered by UFile with the same user ID and password you used last year, or launch your UFile program from your desktop. Enter the information from the slips you have for each family member into their respective files.

Remember, UFile will calculate transfers and optimizations of charitable donations and medical expenses, and provide for such important credits as the eligible dependant amount, any amount for infirm dependants, and provincial tax credits.

Here’s one final tip: don’t be in a hurry! Once you have prepared your return, wait a day or two and then go back and review it. You may think of something you left out or find an input error you did not see before.

Your health

On the way home today I was listening to the radio and one of the comments from one of the hosts of the program said, " If you have a two storey house you should keep a set of cleaning supplies on the second floor to save you the climb up and down stairs while doing your house work".

I thought at the time, what a waste of money and opportunity to get some exercise.

But lets go back to what is happening in our society to a lot of us.

All of the news we hear and see on TV, is about the way we are getting heavier and heavier, our children are doing the same.

It seems that we are always looking for ways to do things with the least amount of effort.
There is a price to pay for all of this, the increased risk of a bunch of ailments, which can be traced directly to the lack of exercise and poor eating habits.