Hi Nilima:
Actual annuities require a consultation with your insurance company. However, for a rough guess, here’s Sunlife’s annuity calculator:
I ran it for men and women with $1m to spend on annuity at age 65. It said you’d get $65k/year for a man and $56k/year for a woman. This is roughly 15$ per dollar for men and $17 per dollar for women.
These numbers suggest that roughly $350k would be enough to get a 20k annuity.
A close analog is BCCPP’s rate for buyback at age 65, which is roughly 28k for a $2000 annuity, or $14 per dollar. (This is 7% cheaper for men and 21% cheaper for women.) This is the most expensive way to buy annuities within BCCPP. And BCCPP annuities are inflation protected (up to 2.07%). At a 6% nominal rate of return, assuming death at 85, the present value of inflation protection is 17% of the asset.
People who are younger at entry to BCCPP have lower annuity prices. To really get the BCCPP exact pricing, you have to stick into a spreadsheet and simulate at a given rate of return.
I suggested 35% to 45% cheaper on the basis of a simulation for someone starting out with the system, and comparing to slightly higher annuity prices from here:
Finally, the variation (that is, why 35-45%?) is the variation between male and female annuity pricing in indiidual markets as opposed to BCCPP’s pooled pricing for males and females.
krishna
______________________
Krishna Pendakur
On Nov 25, 2018, at 1:21 PM, Nilima Nigam <nigam@math.sfu.ca> wrote:
Perhaps someone from the SFUFA pension committee would be able to give us actual numbers on:
- how much it costs to purchase an annuity through our current SunLife plan (both for women and men)- how much it would cost to purchase an annuity through the other options they investigated (e.g. the multieployer plans)- What is the cost of the annuity through the DB plan? I understand one is not technically 'purchasing' it, but there's a cost to the principle nonetheless.
A clarifying comparison in this sense would be: suppose I wanted my annuity to pay me $20,000 annually before tax. What should be going 'into' the pot to achieve this? There will, of course, be different scenarios for the DB plan, based on the number of years of guaranteed income required.
thanksNilima
On Sun, Nov 25, 2018 at 1:07 PM Ronda Arab <ronda_arab@sfu.ca> wrote:
"But, more importantly, as several people pointed out: " In this case, annuities are 35% to 45% cheaper through the BCCCP (or indeed any group annuity pension provider) than through individual (non-group) purchase. " (from a Krishna Pendakur contribution)."
I don't have the exact numbers at my finger tips, but perhaps Krishna does--Annuities for everyone are 35%-45% more expensive if you buy them through individual (non-group) purchase than they are through the BCCCP. And annuities for women are even more expensive, so that seems to mean that the 35%-45% in additional cost is actually more than 35%-45% for women?
Dr. Ronda Arab
Associate Professor of English
Simon Fraser University
From: Martin Hahn <mhahn@sfu.ca>
Sent: 25 November 2018 12:59:55
To: academic-discussion@sfu.ca
Subject: Re: FWIW re the current debate over pensions.....
Here is the missing piece, David. It is not all the same whether you contribute 10% to DB or stay witth DC and save the money. First there is the fact that you are not allowed to save 10% tax free, but only 8% (for an 18% total with the 10% contributed by SFU)
But, more importantly, as several people pointed out: " In this case, annuities are 35% to 45% cheaper through the BCCCP (or indeed any group annuity pension provider) than through individual (non-group) purchase. " (from a Krishna Pendakur contribution).
So if it isa pension your are after (as opposed to cash you can do whatever you want with), the DB plan is vastly superior.
MH
On 11/25/2018 11:59 AM, David Zimmerman wrote:
Hello SFU Faculty.....
This comment on the current pension situation is sent on a strictly FWIW basis.
So, FWIW:
I am an SFU retiree, who left teaching behind six years ago, took the DC Sun Life pension available at the time, and had it invested in a retirement plan [also Sun Life, as it happens, the best of the offered alternatives I canvassed in 2012, but that's another story].....
My question to those who have been agonizing over the choice now facing them is this:
If you have any doubts about the new plan offered, with the 10 % mandatory contribution feature, then, why not just....
- Vote "No," i.e vote to remain in the current plan, which has no mandatory contribution, and...
- in order to reap the benefits of having an additional monthly contribution not covered by the SFU portion of the current plan, and then simply....
- designate some percentage of your monthly salary as an additional pension contribution?
It's your choice to make what the rate deducted will be..... if 10% is too high given your mortgage, etc., then designate something lower, but....do designate some percentage in order to increase your monthly pension contribution above the SFU portion.
Agonizing choice resolved?
If not, why not?
After all, the choice of making or not making that additional contribution, above the SFU minimum, is in your hands, and always has been.If you do opt to have some percentage deducted, then you just have to exercise the requisite discipline to authorize those additional contributions per month, and stick to that plan.Moreover, SFU will help you exercise that discipline.... by first, accepting your instructions to make the additional withdrawals from your pay check, and then actually doing that every month.
Foolishly, during my 40 years or so at SFU, I never did what I am now suggesting that you-all do, the faculty who are agonizing over the current choice.
If I had, my retirement income in 2012 would easily have been double of what I currently live on.
In the light of that foolish decision on my part, my nightly prayer is....."Thank you, SFU, for having made, for all those years, a monthly contribution to my pension fund... whether I matched it or not [which I never did].... unlike many universities, who do demand matching contributions."
If SFU had not done that, I would now be living pretty much solely on my CPP and OAS, which, while more generous than anything available in the USA, would hardly sustain the luxurious life that I now lead.
"Thank you, SFU retirement fund."
Further questions:
- Why did the Faculty Association even bother to present SFU faculty with the current choice, which has turned out to be so agonizing for so many?
- The principal feature of the new proposed system seems to be the mandatory 10% deduction....
- The stated reason was a fear that faculty members were not putting enough by for their retirement.
- Ok.... but wouldn't a better approach have been simply to remind faculty that they already have the option of making a monthly voluntary contribution... and strongly urging everyone to do so, to the tune of whatever percent is feasible to the individual?
Of course, I may be missing something really important about the proposed plan, registered in the recent flurry of emails.
Best wishes,David ZimmermanOn 11/25/2018 11:59 AM, David Zimmerman wrote:
Hello SFU Faculty.....
This comment on the current pension situation is sent on a strictly FWIW basis.
So, FWIW:
I am an SFU retiree, who left teaching behind six years ago, took the DC Sun Life pension available at the time, and had it invested in a retirement plan [also Sun Life, as it happens, the best of the offered alternatives I canvassed in 2012, but that's another story].....
My question to those who have been agonizing over the choice now facing them is this:
If you have any doubts about the new plan offered, with the 10 % mandatory contribution feature, then, why not just....
- Vote "No," i.e vote to remain in the current plan, which has no mandatory contribution, and...
- in order to reap the benefits of having an additional monthly contribution not covered by the SFU portion of the current plan, and then simply....
- designate some percentage of your monthly salary as an additional pension contribution?
It's your choice to make what the rate deducted will be..... if 10% is too high given your mortgage, etc., then designate something lower, but....do designate some percentage in order to increase your monthly pension contribution above the SFU portion.
Agonizing choice resolved?
If not, why not?
After all, the choice of making or not making that additional contribution, above the SFU minimum, is in your hands, and always has been.If you do opt to have some percentage deducted, then you just have to exercise the requisite discipline to authorize those additional contributions per month, and stick to that plan.Moreover, SFU will help you exercise that discipline.... by first, accepting your instructions to make the additional withdrawals from your pay check, and then actually doing that every month.
Foolishly, during my 40 years or so at SFU, I never did what I am now suggesting that you-all do, the faculty who are agonizing over the current choice.
If I had, my retirement income in 2012 would easily have been double of what I currently live on.
In the light of that foolish decision on my part, my nightly prayer is....."Thank you, SFU, for having made, for all those years, a monthly contribution to my pension fund... whether I matched it or not [which I never did].... unlike many universities, who do demand matching contributions."
If SFU had not done that, I would now be living pretty much solely on my CPP and OAS, which, while more generous than anything available in the USA, would hardly sustain the luxurious life that I now lead.
"Thank you, SFU retirement fund."
Further questions:
- Why did the Faculty Association even bother to present SFU faculty with the current choice, which has turned out to be so agonizing for so many?
- The principal feature of the new proposed system seems to be the mandatory 10% deduction....
- The stated reason was a fear that faculty members were not putting enough by for their retirement.
- Ok.... but wouldn't a better approach have been simply to remind faculty that they already have the option of making a monthly voluntary contribution... and strongly urging everyone to do so, to the tune of whatever percent is feasible to the individual?
Of course, I may be missing something really important about the proposed plan, registered in the recent flurry of emails.
Best wishes,David Zimmerman
--
Nilima Nigam
Professor
Dept. of Mathematics
Simon Fraser University