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Hi all,
Sam, I don’t know the answer to your question about whether or not a DB pension will or will not create an incentive for early retirement or not, or, indeed, whether the current incentive will remain in our collective agreement.
What I do know:
Under a DB plan your pension will depend upon a formula which takes into account your 5 best years and number of years of service up to a maximum (possibly) which most of us won’t reach as few are in tenure track jobs by (for example) by 30, which would
give us 35 years of service by 65. So- working past 65 would still have a positive impact on your pension for most people who are unlikely to hit the max years of service.
For people between 55-65, presumably you will have your 5 best years during that period, but you will have few years on the DB plan unless you buy years back. So people nearing retirement will only receive pension amounts from the DB pension based on the
formula which accounts for years of service IN THE PLAN and 5 highest years unless you buy past years.
The main benefit for those early in their careers is that you will retire with a known amount (hence the term defined benefit), improved health benefits if you were hired after something like 2003 (more relevant as you age), and your pension will not be
subject to market fluctuations which (for example) heavily impacted those contemplating retirement following the 2008 crash.
Hope this helps. Ellen.
Apologies for brevity- sent from my phone. -Ellen.
Hi Colleagues,
I've never followed pension issues at SFU, so please excuse my ignorance.
Question:
SFU recently implemented an early-retirement policy.
Would the contemplated terms for DB pension create an incentive or a disincentive for early retirement in comparison with the status quo? Perhaps Ellen has answered this question. I take her to be suggesting that the effect of DBP is income-neutral for faculty-members in the 55-65 bracket. As someone who is about to enter that bracket, I must confess that my interest is not merely policy-oriented, though I do believe that other things equal incentives for faculty turn-over are a good thing. (Many years ago in this forum, I argued against eliminating mandatory retirement at SFU.)
Thanks in advance,
Sam
Sam Black Assoc. Prof. Philosophy, SFU From: Ronda Arab <ronda_arab@sfu.ca>
Sent: November 12, 2018 11:19:17 AM To: Ellen Balka; Tamon Stephen Cc: academic-discussion@sfu.ca Subject: Re: Pensions vs. Mortgages Hi all,
On the retirement issue, a few things to keep in mind. One does not, of course, have to retire at 65, although the DBP would make it possible for more people to have the option to retire at 65.
For those who plan to retire late or never: By Canadian law, at age 71 all contributions to pension plans must cease, and members of the plan must start withdrawing some money from their plan. This is the case on all pension plans. You can continue to work and draw a salary, but you will pay tax on the combined income of salary and pension benefits.
Best, Ronda
Dr. Ronda Arab Associate Professor of English Simon Fraser University From: Ellen Balka <ellenb@sfu.ca>
Sent: 12 November 2018 10:10:37 To: Tamon Stephen Cc: academic-discussion@sfu.ca Subject: Re: Pensions vs. Mortgages Hi all-
As someone who is close to retirement who is both following this issue and has been to an information session I’ve decided to weigh in. I’ll be voting yes in spite of the fact that as someone closer to 60 than 50 it will benefit me very little if at all. In contrast to previous posters my sense is that a) it will not particularly benefit those of us close to retirement unless we choose to buy back years of service, which we will have to do at our current earning rate; and b) once taxes related to pension adjustments etc are accounted for I suspect that the difference in one’s net / take home pay for most people will be negligible; c) between cost of living raises and step progressions any potential shortfall related to paying down a mortgage would be short lived. I can’t comment on monetary grounds that it will be disadvantageous for people to work past 65 as I haven’t used that lens to evaluate options, but I can comment that in some circumstances having a top heavy department can be very problematic in that it can stifle change and contribute to disengagement which in turn can have long term consequences. I’m a saver and good with money. I’ve maxed my RRSP out every year I’ve worked and I was in a tenure track job at 31 (though I lost some pensionable years leaving my first employer just past tenure). Under the current pension system my income will drop considerably when I retire. Under the proposed system had I been in it at the start I’d have a much better income at retirement. Apologies for brevity- sent from my phone. -Ellen. On Nov 11, 2018, at 3:44 PM, Tamon Stephen <tamon@sfu.ca> wrote: Dear all, SFUFA will soon ask us to vote on significant changes to pension plans. I appreciate SFUFA's efforts on this, in particular in identifying issues with the current plan. I've learned a lot from their resources*. However, I believe that we should vote NO in the referendum. The proposal will _require_ all current SFUFA members to contribute 10% of salary (7% after taxes) to their pensions. This is a lot to ask, especially given the housing market here. Many SFUFA members have significant mortgages. For someone who is putting this 7% into reducing their mortgage, moving this to the pension is effectively having them borrow an extra $5000+/year to fund their contribution. Other members are saving for down payments, sending money to family overseas, etc. I do not think that we should require them to contribute this money to a pension plan instead. The question in the previous (2015) pension proposal was quite different, as people could opt out. Roughly, in that previous vote, 31% voted yes, 9% voted no, while 60% did not vote. So many people are not paying attention to SFUFA's pension proposals**. If anything, I feel there has been less discussion this time. I encourage those of you who are not paying attention to 1. learn about what is being proposed* and 2. if you are not sold on this to the extent of _requiring_ your colleagues to invest tens of thousands of dollars (which they may have to borrow), then please vote NO. Note that since SFUFA considers this a referendum, they will proceed to implement this on a mandate of half of cast votes. So e.g. 26% for, 24% against, 50% not voting means _required_ contributions from 100% of SFUFA members, including the 24% who voted NO and the 50% who did not vote. Best regards, Tamon Stephen * SFUFA has posted some resources which I found quite helpful: <http://www.sfufa.ca/current-issues/pensions/resources/> ** I expect that those close to retirement are following this very closely, while those far from retirement are paying very little attention. As I understand the proposal, it may be beneficial to someone very close to retirement (esp. people who own homes outright), but not for younger members (esp. those who have mortgages or plan to). |