A large segment of Saskatchewan people have no access to a pension plan other than contributions to the Canada Pension Plan, or the Old Age Pension.
These people — farmers, small business owners, workers in small businesses — don’t have the option of paying into and drawing from a pooled fund pension plan.
That was the case until the Saskatchewan Government created the Saskatchewan Pension Plan back in the Premier Grant Devine days.
The plan was designed to let everyone earning an income have a pension plan, be they a food server or business owner. Original contribution limits were $500 a year, now $6,200 maximum a year.
The plan operates as a Crown Corporation but hires asset managers to oversee operations. TD Asset Management is the current asset manager.
In 34 years the SPP has grown to about 33,000 members with assets under management closing in on $600 million.
Enrolment is easy, online or offline.
Management fees are less than one per cent a year, leaving the rest for the pension plan.
The plan offers members three types of investment, with an option chosen at the beginning of each year. These options include a balanced fund with investments in stocks from Canada, United States and the rest of the world, real estate, infrastructure and bonds.
The balanced fund is most popular with $478.5 million assets at December 31, 2019.
The diversified fund — essentially a 50-50 split between two mutual funds in stocks and bonds — has $3.9 million assets. The short-term fund, all interest bearing securities, has $3.4 million assets.
The plan also operates an annuity fund with fixed payments for people drawing on their plan. Members can start drawing at age 55 and must start withdrawing funds at age 72.
The critical question for members and prospective members is how have annual returns on investment been? Their size determines how much can be paid out on retirement.
The full fund has had positive returns in 31 of the last 34 years. The fund lost 16.23 per cent in the financial crisis of 2008 with a .33 per cent loss in 2007. And in the late 2018 downswing the fund lost two per cent.
Last year the fund made 14 per cent. The fund earned double-digit returns in 12 years since inception, with the best gain at 21.08 per cent in 1993.
Over the 34 year history, the fund averaged a respectable 7.89 per cent annul growth in value for members.
Anyone planning for retirement and not having access to benefits from the compound earnings effect and risk spreading from a managed pooled pension should consider the Saskatchewan plan.
The plan is never promoted well, so most residents don’t even know of its existence. It almost seems as if the bureaucrats or the government party want this pension plan to die a slow death as assets are eventually paid out.
Ron Walter can be reached at ronjoy@sasktel.net
The views and opinions expressed in this article are those of the author, and do not necessarily reflect the position of this publication.
