Thanks Eugene!
As a member of the SFUFA Executive, I’ve been hesitant to add my own voice to the dialogue. That said, I do feel comfortable acknowledging that your message below captures my own personal experience quite well. For me, the needs of the present
always seemed more pressing than the needs of the distant future, until I got here, although in truth, had I been investing from the start, I could have balanced the present and future with minimal impact.
Thanks for sharing your experience!
Dan
Dear all,
I have been reading this discussion with interest … the sort of bemused fascination one might have when encountering a context very different from one's own. That is to say that I don’t see myself in much of what’s been discussed. Let me tell
you a bit about myself, then, as someone who supports the move to the Defined Benefit plan.
I am just under 50. I make massively more money than my working class parents ever did. My income is nowhere near the high end of incomes at SFU. I ‘own’ a townhouse (I rent it from a bank, actually, but I do accrue equity in the process).
I came to Vancouver in 2003, so the market was already insane and my mortgage debt reflects that. My income is the only large or stable/predictable one in my household. I have a child (with all the joys and expenses that entails). My household is still
saddled with significant student loan debt from the US.
We have not, and will not, benefit from any significant intergenerational wealth transfer (inheritance or ‘family money’). We have never ‘maxed out’ our RRSP limit. Indeed, we have almost never contributed any money to RRSPs because we never
have available funds. We do not have a tax accountant. We do not have a financial advisor (not for a want of trying, in the latter regard, but everyone we’ve tried to engage has either seemed marginally competent, unaffordable, or uninterested in working
with us, given our (relatively) paltry resources.)
I do not trust my ability, as an individual, to manage, benefit from, ‘play,’ or ‘beat’ the financial markets, even with the help of a competent financial planner. I do not trust the idea that state pension funds will be available in any robust
way by the time I retire.
I also do not trust myself to make decisions like squirrelling away 10% of my salary for retirement. But I fully believe that I should do this and I wish I had been doing it for years. But, as a songwriter once said, “If wishes were fast trains
to Texas … how I'd ride.” I always found other things that needed the money in expensive Vancouver. If only somehow I had been forced to (as opposed to have to make a rational choice to) squirrel that money away each month. If only there were a way that
that sort of external discipline could be engrained in my retirement plan.
So, that’s me. And here’s what I believe:
- I am not saving enough for retirement.
- Mandatory pre-tax savings are much more beneficial to one’s future than voluntary post-tax savings.
- Junior colleagues would benefit from learning from my experience and finding a way to squirrel away the 10%, even though I know how very very hard it is here in Vancouver. In the long run, they’d be glad to have had the decision taken out of
their hands each month and to see the financial benefits down the line.
- While I have some equity in real estate, to cash out and use that to live I will need to leave Vancouver when I retire and head to a town I will probably hate living in.
-The Defined Benefit Plan is a massive boon to someone like me because it provides me with what seems to be a reasonable and predictable retirement (not to mention what seem to be much improved health benefits).
Maybe others on this list will see themselves in the description of me that I have provided above. Or, maybe I’m unique. Either way, that’s me. And I am voting for a switch to the Defined Benefit plan.
Best,
Eugene McCann
Geography
PS as this is a ‘personal testimony,’ if you like, I am not up for debating the ins and outs of it. I am throwing it out here in case it resonates with others. I offer it as another reference point for discussion. If others want to point out
mistakes in my reasoning, that’s fine. Indeed, I’ll read them and, no doubt, learn. But please forgive me when I don’t respond.
Thank you, Lucas, for adding a bit of levity to a complex and potentially divisive discussion.
I am now glad that I never had kids (a couple hundred 1st year students every year is, no doubt, an equivalent penance for
my sins).
NB. When housing started to get out of control in the lower mainland, the SFU administration had the foresight to provide housing (at 20% below market value) for faculty/staff (i.e.,
the Verdant complex). I suggest that the Community Trust consider expanding that policy when they undertake future developments.
Cheers,
Steve Whitmore
On the other hand, having "too much retirement income" doesn't mean you have to spend it. You can still give the remainder to your kids and/or charity. A big plus: your kids will have an interest in you
living longer if they benefit from your pension. Whereas if every year you're alive you draw on their future bequest...
Well, I couldn't resist saying the above but as a young faculty I am definitely aware of the constraints of present living. I spent my first 2+ years at SFU paying back high-interest college loans, and
I would not have appreciated the extra 10% in pension contributions. Stands to reason that in the future more and more new faculty will start with debt. If you're 50 and started your SFU career debt-free, please consider this. And if we do move to the pension
plan, maybe some other way to help new faculty can be found.
Hi folks,
The role of the CPP and OAS component should be taken into account in the overall retirement planning. As I understand, the CPP contributions will be steadily increased starting from 2019 onward up until 2025. Intention is for CPP to provide one third of
a worker's annual salary (up to a max salary of about $75K in year 2025 - so I guess about 25K), up from current one fourth. This assumes a 40 yr working career. I am simplifying, please see link below for details.
https://www.canada.ca/en/services/benefits/publicpensions/cpp/cpp-enhancement.html
I am assuming the all DB plans will adjust to take this into account in future. But certainly, under the current College plan, for a 35 yr service, one will get 70% of one's "peak" salary as retirement income. Add CPP and OAS on top, and this is, in my opinion,
way too much saving (forced on us) for retirement while constraining present living, particularly for younger faculty in a city like Vancouver!
I say constraining present living, because going with DB plan will then have three part increase in deductions from our salary: i) additional forced matching contributions for DB plan, ii) additional CPP contributions, iii) reduction in salary increase (to
pay toward .7% transition cost for fifteen years).
I say "way too much saving" because I am assuming that at retirement, i) no debt/mtg payments, and ii) no children expenses and one's needs are generally lower than even 70% figure that most financial planners tout!
Kamal
--
Kamal Gupta
Professor, ENSC
On 2018-11-18 8:23 PM, Krishna Pendakur wrote:
Hello All:
Tamon and Jane pointed out that item 3 below is incorrect. The correct info on the transition costs is given (with some additional detail) in the FAQ and is equal to 0.7% of salary for 15 years, not 1 year.
Thanks for the correction.
krishna
Hello Nilesh: Regarding your points raised below.
1. It is true that we don’t know what fraction of members will benefit vs lose, but this vote will give us that information.
2. Both our status quo SunLife plan and the BCCCP have very low overhead, so they don’t differ much in terms of how much we are paying financial intermediaries.
3. The transition fee is real, and about 10m, amounting to about 0.7% of salary for 1 year. We think of this as part of the cost of switching to DB.
4. The 10.15% employee contribution can indeed go up or down. However, because the BCCCP is very cautious with respect to its ability to pay future benefits (as its actuaries require it to be), these changes occur very slowly, and happen after the fact. So,
if we have a decade of higher than expected growth, our contributions will fall.
5. As I have said before: moving to the BCCCP wil in general, hurt those who are either constrained in the sense that they would not want to save the exta 10% of salary for retirement (e.g., are not
currently saving 10% of salary on top of SFU’s contribution to their DC plan) or don’t want annuities (e.g., because they think they will die young or are not very averse to the risk of running out
of money in old age). For people who fall into neither of these groups (can save 10% of salary and wants annuities), switching to DB will in general help.
6. Your claim that half will gain and half will lose sounds like it doesn’t take into account that when we buy into a DB plan as a group, we get a better price on annuities than if we were each individually
to purchase them in the market at retirement. That is, mandatory-membership DB does redistribute from short-lived to long-lived, but it also makes annuities cheaper in aggregate.
krishna
I was intimidated by the complexity of this decision and so am finding these messages extremely useful. Many thanks.
I see some red flags raised by some which I would like to reiterate for those tuned onto other aspects of this matter. But first 2 general comments to explain my perspective. First, this is a massive,
massive redistribution of risk (which is not cheap at all). Some of us might have an impression that , say 70% of us benefit (eventually) from the move to DB and rest 30% will not, or something like that. But, skeptical that I am of our capacity to beat the
market, this line is going to be much closer to 50. So, say 45%-55% of us may benefit financially and/or risk-wise (and the rest will not - that is, they may end up losing more money than the risk they are reducing).
Second, many things are under the radar (apparently, from the discussion points raised by posters). Irrespective of who and how many of us benefit, know that it is most, absolutely certain that the financial
intermediaries will, and massively. And more often than we think (again, skeptical that I am), the financial intermediaries benefit at the cost of the investors (that is, us). This is how financial sector makes it most of its money -- from intermediation (transaction
fees, portfolio overhaul, risk premiums). So, my experience with investing is that the devil is most often in the details (for increasing the chance to beat the market more than 50% of the time -- its never a slam dunk).
Sorry for the lengthy preamble. My 2 red flags on this discussion list are:
1) transition fees -- can the $19 mil be used to buy the extended health insurance from Sunlife? Again, I am generally skeptical of financial advisors because they are commission based, and therefore,
there is always a bias towards advocating more unnecessary transactions (such as the move to DB and the $19 mil cost).
If we are ready to spend $19 mil, can we not hire a financial advisor for all of us to develop an elaborate DB calculator where each of us can input our specific parameters and do a What-IF analysis.
I don't see such a calculator anywhere. Am I missing something? Isn't this the most basic tool we need? The one I see in an SFUFA email does not really address this.
2) Details glossed over -- such as the 10% deduction from salary, which can go UP (and down?) based on how well the fund does. This means that we are more reliant (than we realize) on the expertise of
the fund manager determining whether DB is "eventually" more profitable or DC.
Someone please comment if these are valid concerns or they have been resolved.
I have a general perception that this decision is being rushed without hammering out more such details. Why are these red flags emerging now? Doesn't it mean that we are not ready for a vote?
At the very least the vote should be postponed (can it?)-- even now I am not sure of voting for DB or DC, just because that it is too rushed. As a midcareer person I have the option of being in the best
(apparently) of both worlds - but that still maybe a long shot from the best (e.g., status quo).
Beedie School of Business
Reading the many comments, the DB plan sounds to be an easier and fairer option.
On the other hand I admit that I don't fully know/understand the potentials and flexibility of our current SunLife plan.
This is because I have idiosyncrasy for the financial capitalism world.
Anyway with some of the funds available in our current plan your savings can provide very competitive personal rates of return such as.
YTD: 7.6% ; 1 Year: 8.9% 2 Year: 13.5%; 3 Year: 11.1%; 5 Year: 11.3%
It also appears that among the benefits of our current DC plan, one could buy/opt in for long term medical insurance through SunLife.
And after all it sounds that the proposed DB plan will be managed very much as the current SFU APP Balanced Fund.
In fact when financial advisers state that they cannot offer anything better than the proposed DB, I worry that the current projections for the DB may be unrealistic and it will end up being a fund very much like one of the most conservative that we already
have access to.
So, my impression is that with this vote we starting to opt out from a flexible system (tested but surely improvable) to fully commit to a more rigid pension plan with comparable or slightly better pension conditions. The issue is that the DB plan still needs
to be fully negotiated by BCCP and the University.
Never the less it is already clear that it will be significantly more expensive to run for us than the current DC plan.
Maybe what we need as SFUFA is to obtain free professional individual financial assistance to manage our current DC plans.
Francesco
P.S. Is there someone that could illustrate the full benefits of the current plan?
_______________________________________
From: Tamon Stephen [tamon@sfu.ca]
Sent: Friday, November 16, 2018 11:29 PM
To: Michael Monagan; academic-discussion@sfu.ca
Subject: Re: pension plan
Dear all,
A number of posters have mentioned the improved medical benefits for faculty hired after 2001 as a critical factor in their support of the BCCPP plan. Personally, I agree that the medical benefits are big positive about the plan, maybe the best thing about
it. But on the other hand, they may not be that large a part of the whole picture. Suppose that we do not go ahead with DB. Does SFUFA have an estimate for how much it would cost us to get similar benefits in the next negotiation? Perhaps it could be a
top priority if we end up in that situation?
There was some discussion of transition costs to DB, mentioning $10 million to $40 million (I think from one of the unrecorded info sessions?). The consolidated FAQ (Q 37) mentions $19 million, as well as 0.7% or 1.27% of salary mass amortized over 15 years.
This is quite a bit. If this amount can be conjured up for transitioning to DB, how far would it go towards buying the medical benefits straight up? I think SFUFA's membership is around 1000(?), so the $19 million would be about $19,000 per member (and maybe
twice if we only include the half(??) of members hired since 2001). It seems like $19,000 could be about what $150,000 in medical benefits might cost, given that many people won't use them and some of them are far in the future.
A couple of related technical points: is the $150,000 limit fixed, or is it indexed? Are the costs listed in the post-retirement benefit table <http://www.sfufa.ca/wp-content/uploads/2018/09/Post-Ret-Benefits-Table-R2018-1.pdf>
monthy, yearly, biweekly or something else? And do they tend to move much?
Michael, about phased retirement ... George Kirczenow asked a while ago if it would even continue to exist. Unless I missed it, that question was not answered. My assumption, then, is that it is one of those things that will be left to negotiations. Roughly
the way I interpret your numbers is that that by the time you have accumulated 30 years of service, you can get half your pay from the pension anyway, so it more or less makes sense that continuing to work half time = working for free. Of course, that doesn't
make sense for the employee, so I don't think they expect that to be what it looks like in its final form. I would guess that they resolve it either by eliminating phased retirement entirely (perhaps then George and a few others in the middle of phased retirement
will just continue under the old deal and not transition to DB), or for instance by letting you collect a half pension while working half time (seems reasonable, but there might be some difficulties ...). It does seem like a relevant issue, and if SFUFA could
say anything about it, some people would be interested. Does phased retirement exist for current BCCPP institutions?
Best regards,
Tamon
________________________________________
From: Michael Monagan <mmonagan@sfu.ca>
Sent: November 16, 2018 5:37 PM
To: Lyn Bartram; Ronda Arab
Cc: Julian Christians; academic-discussion@sfu.ca
Subject: Re: pension plan
I have done a calculation to figure out what you lose if you work half time after 65 at SFU for five years under the college pension plan.
Assume you worked for 30 years and the last 5 years average salary was $150,000 and you live to 85 which is just over the average life expectancy.
If you retire at 65 you collect 0.02 x 150 thousand = $90 thousand per year for 20 years = 1.8 million.
If you decide instead to work half time for 5 years at SFU at $75,000 per year from 65 yrs to 70 yrs.
You earn 5 x $75,000 = $375,000 less 10% (to BCCPP) = $337,500.
You get 2.5 extra years of service.
But you lose 5 years of pension.
This works out overall to be a loss of $338,000.
New pension for 70-85 yrs is 0.02 x 15 yrs x 32.5 yrs service x $150 thousand = 1.462 million.
This is a loss of 1.8 - 1.462 million = 338,000.
So you earned $337,500 in salary but lost $338,000 from your pension!
I'd like someone to check my numbers. Tamon?
Mike
________________________________
From: Lyn Bartram <lyn_bartram@sfu.ca>
Sent: Friday, November 16, 2018 4:56:35 PM
To: Ronda Arab
Cc: Julian Christians; academic-discussion@sfu.ca
Subject: Re: pension plan
Thanks for the clarification. I note as well for people like me who may only be in the plan for a year or two that even a month in the plan before retirement provides that 10x increase in health benefits. To me that is substantial, especially given my family’s
health challenges.
_________________________________________
Lyn Bartram
Associate Professor, Graduate Program Chair
School of Interactive Art + Technology
Simon Fraser University
(Poorly typed on my iPad)
On Nov 16, 2018, at 16:53, Ronda Arab <ronda_arab@sfu.ca<mailto:ronda_arab@sfu.ca>>
wrote:
Hi Lyn & Julian,
It's correct in the sense that the sum total of what you collect will be likely be smaller because you've collected your pension for fewer years. You don't, of course, collect a smaller yearly annuity if you retire later; in fact your yearly annuity will be
higher because you'll have more years to plug into the formula of (years of service)(.02)(average salary for best 5 years).
Best,
Ronda
Dr. Ronda Arab
Associate Professor of English
Simon Fraser University
________________________________
From: Julian Christians <julian_christians@sfu.ca<mailto:julian_christians@sfu.ca>>
Sent: 16 November 2018 16:39:22
To: Lyn Bartram; academic-discussion@sfu.ca<mailto:academic-discussion@sfu.ca>
Subject: Re: pension plan
Hi Lyn
Michael's point is correct. The later you retire after 65, the fewer years you spend in retirement. What you get out of the BCCPP depends on how many years between when you retire and when you die, so if you retire later, you get less. If you work after 65,
you do continue to accumulate years of service, so the amount you get when you retire will increase, but this is unlikely to offset the reduced number of years of pension benefit that you will collect.
You must start collecting your pension at 71 (https://college.pensionsbc.ca/when-you-can-retire), so I'm not sure what
happens if you are still working at 71 (i.e., whether you can collect your salary AND your pension?!?).
Cheers
Julian
________________________________________
From: Lyn Bartram <lyn_bartram@sfu.ca<mailto:lyn_bartram@sfu.ca>>
Sent: Friday, November 16, 2018 4:18 PM
To: academic-discussion@sfu.ca<mailto:academic-discussion@sfu.ca>
Subject: FW: pension plan
Dear Mike, thanks very much for these cogent arguments. I will confess in my research I missed this point:
“If you are thinking of working beyond 65 at SFU, perhaps working
part time after 65 at SFU, you lose big. For each year you don't
retire you lose a year of your pension in the college pension plan.”
Is this really true? How can this be – 65 is no longer a meaningful retirement number legally. For those of who consider working part time for another couple of years, how are we exactly disadvantaged? Can one of the SFUFA experts answer this please?
Lyn Bartram, Ph.D.
Director, Vancouver Institute of Visual Analytics<http://viva-viva.ca/>
Associate Professor
School of Interactive Arts and Technology<http://www.siat.sfu.ca/>
Simon Fraser University<http://www.sfu.ca/>
CANADA
v 778 782 7439/8009 f 778
782 9422 m 604 908 9954
lyn@sfu.ca<mailto:lyn@sfu.ca><mailto:lyn@sfu.ca>
From: Lyn Bartram <lyn_bartram@sfu.ca<mailto:lyn_bartram@sfu.ca>>
Date: Friday, November 16, 2018 at 4:07 PM
To: Michael Monagan <mmonagan@sfu.ca<mailto:mmonagan@sfu.ca>>,
"adacemic-discussion@sfu.ca<mailto:adacemic-discussion@sfu.ca>"
<adacemic-discussion@sfu.ca<mailto:adacemic-discussion@sfu.ca>>
Cc: "nigam@math.sfu.ca<mailto:nigam@math.sfu.ca>" <nigam@math.sfu.ca<mailto:nigam@math.sfu.ca>>
Subject: Re: pension plan
Dear Mike, thanks very much for these cogent arguments. I will confess in my research I missed this point:
“If you are thinking of working beyond 65 at SFU, perhaps working
part time after 65 at SFU, you lose big. For each year you don't
retire you lose a year of your pension in the college pension plan.”
Is this really true? How can this be – 65 is no longer a meaningful retirement number legally. For those of who consider working part time for another couple of years, how are we exactly disadvantaged? Can one of the SFUFA experts answer this please?
Lyn Bartram, Ph.D.
Director, Vancouver Institute of Visual Analytics<http://viva-viva.ca/>
Associate Professor
School of Interactive Arts and Technology<http://www.siat.sfu.ca/>
Simon Fraser University<http://www.sfu.ca/>
CANADA
v 778 782 7439/8009 f 778
782 9422 m 604 908 9954
lyn@sfu.ca<mailto:lyn@sfu.ca><mailto:lyn@sfu.ca>
From: Michael Monagan <mmonagan@sfu.ca<mailto:mmonagan@sfu.ca>>
Date: Friday, November 16, 2018 at 3:59 PM
To: "adacemic-discussion@sfu.ca<mailto:adacemic-discussion@sfu.ca>"
<adacemic-discussion@sfu.ca<mailto:adacemic-discussion@sfu.ca>>
Cc: "nigam@math.sfu.ca<mailto:nigam@math.sfu.ca>" <nigam@math.sfu.ca<mailto:nigam@math.sfu.ca>>
Subject: pension plan
If you are thinking of working beyond 65 at SFU, perhaps working
part time after 65 at SFU, you lose big. For each year you don't
retire you lose a year of your pension in the college pension pl
_______________________________________________________
Eugene McCann
University Professor, Geography
Associate Faculty, Sociology & Anthropology
Simon Fraser University
Managing Editor, EPC: Politics & Space
Personal website: https://emccanngeog.wordpress.com
Collective website: http://research.northumbria.ac.uk/urbanfutures/
Contact information:
Department of Geography, Simon Fraser University,
8888 University Drive, Burnaby, British Columbia, V5A 1S6, Canada
Unceded territories of the xʷməθkwəy̓əm (Musqueam), Skwxwú7mesh (Squamish), and Səl̓ílwətaɬ (Tsleil-Waututh) Nations.
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