Sunday, July 18, 2010

Canada update from the NRPC

The NRPC emailed a newsletter last week to it's membership. Members can check it out on the NRPC link on the right hand column. For those of you who aren't members of the Canadian NRPC I have included a few of the highlights that might impact you. The following notes are my interpretation of the newsletter and are not specific statements by the NRPC.

1.Annual General Meeting
The Annual General Meeting of the NRPC will be held August 24th This will be a procedural meeting only so don't expect to get answers on pensions etc. there. Members will be able to vote at the meeting or by proxy.

2. Terminated employees.
The $3K for terminated employees should start appearing in July and should be completed by the end of August. The NRPC is working with the Canadian Revenue Agency on an interim PAR ( Pension Adjustment Reversal) which would help from a tax perspective and give some income while the pension plan wind up gets sorted out. They are also trying to obtain a more favorable application of the LIRA transfer limit.

3. Webinars
Two webinars will be held before the end of September.

4. Ontario pension top up.
The top up will apply to people who worked in Ontario all or part of their career at Nortel. Your current location or residence does not factor into the calculation. Only your service. The top up applies only to the first $1000 per month, of your pension you earned in Ontario. For those of you with less than 100% of your pension from Nortel service in Ontario, the calculation will determine a percentage based on the years of service in Ontario compared to total Nortel service. ( I am not clear on whether this means total Nortel service worldwide, or Nortel service Canada.)

To determine the top up, first work out the amount of your monthly pension related to service in Ontario. (Multiply your monthly pension by the percentage of your total Nortel service that came from service in Ontario.) If that amount if more than $1000, it has to be capped at $1000 since the top up is limited to $1000.

Multiply the Ontario pension amount (up to $1000) by the trust fund factor at wind up. This may be 70%, or 60% or less depending on the wind up ratio.

Subtract that number from the Ontario pension (maximum $1000) that you determined in the first step. That difference will be paid to you by the Ontario government to bring you back to the total Ontario pension (maximum $1000) you worked out in the first step.

For example lets say your monthly pension is $2,000.
You worked a total of 30 years at Nortel.
You worked 12 years in Ontario and 18 years in some other province.
You percentage Ontario pension ratio is 12/30 = 0.4 (or 40%).
You eligible Ontario pension for top up is $2000 time 0.4 = $800.
The rest of your pension, $1200, is paid from the trust fund at the wind up ratio.
The wind up pension factor is 0.60 (60%)
Your Ontario pension $800 times the wind up factor 0.6 is $480.
The top up is therefore $800 minus $480, or $320.

So Ontario will pay you $320. The trust fund will pay you $480 for the Ontario portion, and the trust fund will pay $1200 times the wind up factor 0.6 = $720 from the rest of your pension for a total of $1520.

5. Quebec Law One

This will apply to people who retired from Quebec.
It has 3 options. Take the pension as an annuity right now. Take a lump sum payment and transfer it into a LIF. Transfer the pension into the RRQ and start taking an annuity payment. The last option is basically an attempt to protect your pension value to let it grow over 5 years and take advantage of better annuity rates at a later date.

6. Health Coverage Replacement (Canada)
The NRPC is working with Canadian Insurance companies to work out a replacement plan after December 2010 when the current plan ends. At this time there is no definitive result to report. Future newsletters will provide more details on the exact status and action on health coverage as well as life insurance for Canadian retirees.

7. Political Front
House Bill C-501 has been referred to the Industry committee. There is conservative opposition to it. It will need a lot of public support to change their minds and take it further. Letter writing and discussions are ongoing and pressure on the MPs continues, with Ads taken out in major newspapers.

Bill S-214 in the Senate is being pushed by the liberal senators. It has not yet reached a committee. The NRPC has requested both the Senate and the House to make a presentation on the impact and need for passage of these bills.

8. Communications
Their are now 180 letter warriors sending letters to the media and the elected officials. The volume of letters and emails has helped educate many MPS and Senators as well as the public on the real impact of company bankruptcy on pensioners. More letter writers are always welcome. Check the NRPC website for details as to how to assist.

A group has been set up inside the NRPC to help publish electronic newsletters on a more regular basis. These communications are extremely important as we near the date at which Nortel ceases to administer the Canadian pension, (Sept 30th), and terminates the health and LTD benefits. (Dec 31st).

9.Financial Sponsorship
The NRPC is working with the Ontario Ministry of Finance to change regulations so that a Financial Institution could take over running the Nortel Pension Plan instead of winding it up and purchasing annuities. These discussions cannot be made public yet, but the NRPC's goal is to avoid conversion to annuities which would further reduce the trust Fund payout ratio.

4 comments:

  1. it's really Nice article on Annuity,have some very good points in addition to this i want to discuss some more points regarding Annuity ::-
    I have read your article, I have a question for you. We talk about 2 types of Investments 1. ULIP and 2. Mutual Funds.

    When you talk about ULIP, The maintainance Charges ,Morality Charges , Allocation charges come close to 40% of annual PermiumEg.HDFC Pension Plans. Apart from that they charge every year for maintainace.

    When you talk about Mutual Funds One time entrance fee of 2.5%, no annual charges.

    My question is

    1. Is ULIP giving higher returns than Mutual Funds,since close to 30% of our investement goes for maintainace,morlaity,allocation,annual charges

    2. What is the difference between Investing in ULIP's with Insurance plans like LIC Jeevan Tarang,Jeevan anand etc.

    ReplyDelete
  2. I have read your article, I have a question for you. We talk about 2 types of Investments 1. ULIP and 2. Mutual Funds.

    When you talk about ULIP, The maintainance Charges ,Morality Charges , Allocation charges come close to 40% of annual PermiumEg.HDFC Pension Plans. Apart from that they charge every year for maintainace.

    When you talk about Mutual Funds One time entrance fee of 2.5%, no annual charges.

    ReplyDelete
  3. Earning money online never been this easy and transparent. You would find great tips on how to make that dream amount every month. So go ahead and click here for more details and open floodgates to your online income. All the best.

    ReplyDelete
  4. Earning money online never been this easy and transparent. You would find great tips on how to make that dream amount every month. So go ahead and click here for more details and open floodgates to your online income. All the best.

    ReplyDelete