Some related articles :
Pension Limit Ignores Inflation Impact
federal government is finally set to do something about a long-outdated
rule that is causing financial difficulties for an increasing number of
problem: the response is too little, too late. Worse, it doesn’t take
effect until 2005, and even that date is not certain.
Ottawa’s long-standing rule caps the amount of
money a retired employee can receive from an employer pension plan.
ceiling on tax-deductible contributions to such plans is meant to prevent
companies from funding outrageously high benefits for employees at
taxpayers’ expense. (Pension plan contributions are tax-deductible to an
employer and are not a taxable benefit for employees.)
cap is determined by multiplying your years of service by $1,722.22. So,
if you were with a company 20 years, the maximum initial annual pension
you could draw would be $34,444.40.
cap provides for indexing in the annual pension payment, based on
increases in the Consumer Price Index (CPI), to a maximum of four per cent
a year. (Unfortunately, many private sector pension plans do not include
the basic formula itself is not indexed, quietly ignoring the harsh
reality that $1,722.22 simply doesn’t buy the same today as it did in
those figures, I calculated that if the pension formula had been indexed
to inflation over that time, the base figure would have almost tripled, to
someone with 20 years of service, the maximum allowable annual pension
entitlement would increase to $100,162.40! The numbers speak for
course, few Canadians would qualify for an employer pension of more than
$100,000. But many people with 20 years of service would qualify for much
more than $34,000-and-change, based on career earnings or final average
what does Ottawa plan to do about it? I talked to the Finance Department
and was told that the current plan is to begin indexing the base figure to
increases in the average annual wage.
that’s not scheduled to cut in until 2005, some 28 years after the
formula was put into place. And there’s no guarantee it will happen even
government at one time said indexing would be introduced in 1995, then put
it on hold. This postponement will have lasted a decade, if indeed it does
happen in 2005.
certainly should not be delayed again.
recommend that you meet with your pension plan administrator to find out
exactly how much you can expect to receive at retirement.
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