Here is how ML describes the new pension plan...
"Beginning in September 2020, foreign teachers are eligible for a voluntary 3% matching pension plan, where the employee contributes 3% and Maple Leaf contributes 3%. These funds are held in trust by the HSBC (Hong Kong) and are limited in respect to the Pension Scheme, accumulate interest in an investment plan selected by the employee and must withdraw the accrued benefits under the Pension Plan upon resignation from Maple Leaf
The Pension Plan becomes vested at the end of the third year of employment with Maple Leaf. Upon departing ML, 100% of the teacher invested portions with interest must be withdrawn by the teacher and an increasing percentage of the Maple Leaf portion according to years of Maple Leaf service from 30% after the third year, increasing 10% each year thereafter up to 100% after ten years
Foreign teachers with consecutive years of employment prior to September 2020 may include these years of service in calculating Maple Leaf’s contribution when the teacher retires. For example, if a foreign teacher has worked five consecutive years prior to September 2020, and remains employed for three more years, the teacher would receive 80% of Maple Leaf’s contribution to the Pension Plan (5 years + 3 years). Teachers that begin their employment on September 1, 2020, and complete a 2-year contract, will receive their funds plus interest which they have invested in the pension plan but none of Maple Leaf’s portion. Foreign teachers begin to benefit from the company’s contribution after 3 years once the pension funds are vested. Only foreign ESL and certified teachers are eligible for the pension plan."
(Peter Froese, March/25/2020)
I inquired to see how "solid' this was with our Superintendent Peter Froese. In the past when ML was struggling with funds, they had taking away a benefit from deserving teachers...I would be extremely upset and SOL in the event that it did it to me. With a company like ML-I am inclined to believe that history indeed will repeat itself.
Here was my response,
"The Pension Plan will be an addendum to those on the 2019 - 2021 contract and it will be written into all new contract for 2020-2022 and other contracts going forward. Hope this helps."
(Peter Froese, March/25/2020)
I researched this, and it rose a red-flag..sounded very much like something ML would pull:
You want a future-proof retirement savings option. Pension plans are subject to freezes, which prevent new enrollees in the plan, and buyouts, whereby employers offer a lump-sum payment to reduce the financial burden of long-term payouts.11
(https://www.thebalance.com/what-is-a-pension-plan-2385771)
Could this happen? The investment is done through HSBC...Hong Kong...not Canada. Which also begs the question...what will the payout be in? All the money would need to be in HKD and then exchanged over...at a rate (obviously), which might ultimately take away from the REAL benefits of it.
hmmmm. the HKD and CAD are not exactly what I would call "strong currencies" and I don't plan on ever living in HK....
This is why the ML pension plan initially sounds worthwhile...
"Beginning in September 2020, foreign teachers are eligible for a voluntary 3% matching pension plan, where the employee contributes 3% and Maple Leaf contributes 3%. These funds are held in trust by the HSBC (Hong Kong) and are limited in respect to the Pension Scheme, accumulate interest in an investment plan selected by the employee and must withdraw the accrued benefits under the Pension Plan upon resignation from Maple Leaf
The Pension Plan becomes vested at the end of the third year of employment with Maple Leaf. Upon departing ML, 100% of the teacher invested portions with interest must be withdrawn by the teacher and an increasing percentage of the Maple Leaf portion according to years of Maple Leaf service from 30% after the third year, increasing 10% each year thereafter up to 100% after ten years
Foreign teachers with consecutive years of employment prior to September 2020 may include these years of service in calculating Maple Leaf’s contribution when the teacher retires. For example, if a foreign teacher has worked five consecutive years prior to September 2020, and remains employed for three more years, the teacher would receive 80% of Maple Leaf’s contribution to the Pension Plan (5 years + 3 years). Teachers that begin their employment on September 1, 2020, and complete a 2-year contract, will receive their funds plus interest which they have invested in the pension plan but none of Maple Leaf’s portion. Foreign teachers begin to benefit from the company’s contribution after 3 years once the pension funds are vested. Only foreign ESL and certified teachers are eligible for the pension plan."
(Peter Froese, March/25/2020)
I inquired to see how "solid' this was with our Superintendent Peter Froese. In the past when ML was struggling with funds, they had taking away a benefit from deserving teachers...I would be extremely upset and SOL in the event that it did it to me. With a company like ML-I am inclined to believe that history indeed will repeat itself.
Here was my response,
"The Pension Plan will be an addendum to those on the 2019 - 2021 contract and it will be written into all new contract for 2020-2022 and other contracts going forward. Hope this helps."
(Peter Froese, March/25/2020)
I researched this, and it rose a red-flag..sounded very much like something ML would pull:
You want a future-proof retirement savings option. Pension plans are subject to freezes, which prevent new enrollees in the plan, and buyouts, whereby employers offer a lump-sum payment to reduce the financial burden of long-term payouts.11
(https://www.thebalance.com/what-is-a-pension-plan-2385771)
Could this happen? The investment is done through HSBC...Hong Kong...not Canada. Which also begs the question...what will the payout be in? All the money would need to be in HKD and then exchanged over...at a rate (obviously), which might ultimately take away from the REAL benefits of it.
hmmmm. the HKD and CAD are not exactly what I would call "strong currencies" and I don't plan on ever living in HK....
This is why the ML pension plan initially sounds worthwhile...
- You intend to stick with the same company for the long haul. If you intend to spend several years or even your entire career at one company, it may make sense to participate in the pension plan. This is because you are more likely to become fully vested in the plan, which would entitle you to use all of the benefits that you accrue in the plan.10
- You don't plan on moving. If the employment that makes you eligible for a pension plan is location-dependent—for example, if you work as a teacher, and the state runs the retirement plan—it may make sense to choose the pension since you will likely keep working in the same state.
- (https://www.thebalance.com/what-is-a-pension-plan-2385771)
Is this something that is really feasible for ML?
There are limits to the amount which can be held in a pension fund and the amount that can be contributed to it each year for a member without the imposition of certain tax charges.
With staff will over 50,000 CAD a year, Principals clearing 80,000 a year easy. Is there a limit to a company with over 200 contributing employees all making over 50,000$ a year?
hmmmm....
This also tells me that what ML is doing is not really a "pension" but more so a long term investment...
"Here are some benefits of a workplace pension:
- Your workplace pension gives you your own pension that belongs to you – even if you leave your job in the future, it’s yours to keep."
- (https://thepeoplespension.co.uk/workplace-pension-contributions/)
Which is actually true...I have an OMERS pension..I can't pay into it...but it is mine, even after I left the public sector....Whereas ML states,
"Upon
departing ML, 100% of the teacher invested portions with interest must be withdrawn by the teacher
and an increasing percentage of the Maple Leaf portion according to years of Maple Leaf service from 30%
after the third year, increasing 10% each year thereafter up to 100% after ten years"
(Peter Froese, March, 25, 2020)
This means that its not your own pension plan after you leave-you need to get paid out.
Furthermore this is a "Direct Benefits Pension Plan"
Defined benefit pensions
A DB pension entitles a plan member to a future benefit that is based on a formula. It might be something like 2% times your years of service times your average salary in your final three years of work, as an example. So, 2% x 30 years of service x a $100,000 final average salary would result in an annual pension of $60,000.
A DB pension is predictable and is not directly subject to stock market volatility for a plan member. When the pension begins, it is a pre-determined monthly payment.
This is important to note because,
Contributions you make to your DB pension plan re tax-deductible: They reduce your taxable income and generate tax savings. At the same time, pension contributions reduce Registered Retirement Savings Plan (RRSP) room so that pension plan members do not have an unfair advantage over non-pension plan members. The calculation of how much RRSP room you lose when you are in a DB pension plan is complicated, but basically it is a function of how much future pension you earned in the year and how much an RRSP contributor would have to contribute to their RRSP to receive the same future income
Well, now I am little confused...what is ML offering?
Defined benefit (final salary) pensions
These pay a retirement income based on your salary and how long you have been a member of the scheme.
These are also known as ‘final salary’ or ‘career average’ pension schemes.
They’re generally only public sector or older workplace pension schemes.
If you belong to one, you’ll usually be sent an annual benefit statement by your pension scheme.
If you don’t receive a statement, you can request one.
The statement shows how much pension you might get. It might assume that you take your tax-free cash lump sum.
Defined contribution (money purchase) pensions
With these schemes you build up a pot of money that you can then use to provide yourself with an income in retirement.
The value of your pot is based on your contributions, your employer’s contributions (if applicable) plus investment returns and tax relief.
Defined contribution schemes include workplace, personal and stakeholder pensions.
Schemes can be run through an insurance company, master trust provider, or you might be a member of a bespoke scheme set up by your employer.
Your annual statements estimate the monthly retirement income your pension is on track to generate if you were to convert it into a guaranteed income for life (also known as an annuity).
The income on your statement might not assume that you take your tax-free cash lump sum.
You now have complete freedom over how you can access your pension funds if you’re 55 or over and have this type of scheme.
So while your pension statements provide useful estimates of your likely retirement income based on you converting your pension pot into an annuity, you do have other options.
In case that last explanation of the different pensions wasn't clear, here was a more informally worded one
Defined contribution – what you pay in is directly linked to what you get out. These are more common in the private sector and you’re not guaranteed any particular level of pension.
Defined benefits – these used to be more common and meant that you’d get a set amount on the day you retired, and you didn’t always have to pay in yourself. They’ve become much rarer now as many employers have closed their schemes and moved to defined contribution schemes, which are cheaper and less risky for them, but public sector pensions are usually a type of defined benefits schemes.
As a public sector worker, you’ll usually be offered a set level of pension when you retire, which may be guaranteed to rise in line with prices. Your employer will pay in for you, but you’ll usually be required to pay into your pension now too. If your employer offers you a defined benefits pension, this is likely to be the best deal you’ll be able to get.
Now the real deal breaker/maker...what does it look like against a potential ON teacher's Pension...could I gamble on such a thing?
