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Hi,
I am resending my comments since I accidentally replied only to Ronda. Several comments have been subsequently sent, perhaps making my comments outdated.
Interesting discussion. I will throw in my two-cents, and that is likely worth less than that. Before doing so, it
is worth noting the implications for our colleagues when casting a vote. The challenge for many is changing the rules mid-game. That is, some folks have set up
their financial lives under the current system, but the proposed system means that one's take-home pay would be less. This will be a real challenge for some if a home was purchased recently or if they are in a single-income
family with a mortgage or large rent(s), for example.
Now, off we go...
Many employers, in my experience, require some sort of mandatory contribution regardless of the type of pension (defined benefit or defined contribution)
to participate. Defined contribution programs often require a 1-1 match, up to some percentage of your salary. In my previous position, the University matched 2-1. So, to get the 10% from the Uni, I had to contribute 5% of my salary. At SFU we have not
done this, but the notion of mandatory payments appears to be common and not a big ethical hurdle for many.
A different view of the proposed defined benefit program is that it is about peace of mind or security. For the most part, you will not have to think
much about your pension and can plan out your retirement with a clearer notion of your post-retirement income instead of guessing about the average return of the stock market. It can be argued that, historically, the stock market will do better for you. That
is fine if optimizing the expected return is the goal (the realized return can only be known at retirement). However, for many, some sort of retirement guarantee is preferable to potential gains + individual market risk. The
proposed plan is not a guarantee if the world turns upside down, but does mitigate the impact of a 2008 sort of event as I understand it.
One could view the proposed plan as beneficial to those that retire at 65 (I plan to be in my office well past 65). Alternatively, one could
view the plan as providing choices as one gets older. Nobody says one has to retire, but future health and family issues may require that you do so – i.e., security. You never know. The trade-off, for some, is choices now (e.g., paying down a mortgage faster,
a nicer home, different investments, ...) or choices later (e.g., the proposed pension plan).
Finally, in the late 1990’s, the University and SFUFA agreed to a health benefits plan that allows for post-retirement
benefits for existing SFUFA members, but not for those who started in the 2000’s. Under the proposed pension scheme, there is the (surprising?)
benefit that allows for post-retirement health benefits for everyone… again, as I understand it.
Derek Bingham Professor Department of Statistics and Actuarial Science Simon Fraser University From: Ronda Arab <ronda_arab@sfu.ca>
Sent: Monday, 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). |