Saskatchewan Pension Plan

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The Saskatchewan Pension Plan (SPP) is a voluntary defined contribution pension plan created by the Government of Saskatchewan. The SPP was created through The Saskatchewan Pension Plan Act . [1] Oversight of the plan rests with the Saskatchewan Pension Plan Board of Trustees. The plan is also open to both residents (over the age of 18) of Saskatchewan and other provinces. [2] Saskatchewan is the only province in Canada that operates a voluntary pension plan of this nature. The plan has assets of $700 million and over 32,000 members. [3] The maximum annual individual contribution is $7,000, indexed annually according to the change in the Year's Maximum Pensionable Earnings. [4]

Contents

History

Over the last several years, the amount of money that a person can contribute annually to the Saskatchewan Pension Plan has grown from $600, to $2,500, and now to $7,000. [5] This means participants have the ability to save a substantial amount of money in a retirement plan which delivers a real pension is now possible. Additionally, the SPP allows its members to transfer up to $10,000 per year from their RRSP investments to the plan. [6] This means that total contributions can easily amount to $7,000 + $10,000 = $17,000 annually, which is a beneficial strategy for anyone wanting to contribute more than the $7,000 annual limit. [7] Through the power of compound interest substantial growth can be experienced over the years on these contributions. [8]

Locked-in provision

Money invested in the SPP is locked-in until retirement, which means it cannot be withdrawn except as stipulated in the Regulations of the plan. There are specific provisions for the division of monies invested during marital breakdown. Additionally, the Member Handbook declares that, "the only way SPP funds can be claimed or seized is following an order under The Enforcement of Maintenance Orders Act, [9] 1997." [10] Thus, money invested in SPP is by definition a long-term investment and is offered some protections from seizure. This can be very advantageous to people trying to save for retirement as their money is safe both from them spending it (because it is locked-in) and some legal protections keep other people from getting at it. A final important point is that money invested in an SPP account grows tax exempt because it has the same tax status as a Registered Retirement Savings Plan (RRSP).

Investing

The SPP offers two funds, the Balanced Fund (BF) [11] and Diversified Income Fund (DIF) formerly Short-term fund. [12] The BF is targeted for long-term growth of capital and has medium volatility, while the DIF provides a low risk option that offers income from diversified sources. [13] Members are able to set an allocation of their investments between these two funds to match their risk tolerance and other investment goals. [14] The low management expense ratio (MER) of the SPP means your money enjoys better long term growth. [15] The MER on the BF has a historical range of 0.79% - 1.24%. [16] Moreover, the average annual rate of return (earnings) on the BF fund since inception has been 8.10%. [17]

Retirement

Planning for retirement is a dilemma faced by many Canadians, and often necessitates developing a strategy to have multiple streams of income during retirement years. The SPP can help bridge the gap between Old Age Security, the Canada Pension Plan, TFSAs, RRSPs, personal savings, and an employer pension plan to offer additional financial security during retirement. The money contributed to the SPP can be converted to an annuity, [18] locked-in retirement account, or prescribed registered retirement income fund. [19] In 2021 they introduced a Variable Benefit [20] option for members in Saskatchewan. The retirement options available to SPP members are covered on the SPP website. [21] Retirement from SPP must take place between the ages of 55 to 71.

Related Research Articles

In the United States, a 401(k) plan is an employer-sponsored defined-contribution pension account defined in subsection 401(k) of the Internal Revenue Code. Employee funding comes directly off their paycheck and may be matched by the employer. There are two types: traditional and Roth 401(k). For Roth accounts, contributions and withdrawals have no impact on income tax. For traditional accounts, contributions may be deducted from taxable income and withdrawals are added to taxable income. There are limits to contributions, rules governing withdrawals and possible penalties.

Pension Retirement fund

A pension is a fund into which a sum of money is added during an employee's employment years and from which payments are drawn to support the person's retirement from work in the form of periodic payments. A pension may be a "defined benefit plan", where a fixed sum is paid regularly to a person, or a "defined contribution plan", under which a fixed sum is invested that then becomes available at retirement age. Pensions should not be confused with severance pay; the former is usually paid in regular amounts for life after retirement, while the latter is typically paid as a fixed amount after involuntary termination of employment before retirement.

A pension fund, also known as a superannuation fund in some countries, is any plan, fund, or scheme which provides retirement income.

An individual savings account is a class of retail investment arrangement available to residents of the United Kingdom. First introduced in 1999, the accounts have favourable tax status. Payments into the account are made from after-tax income, then the account is exempt from income tax and capital gains tax on the investment returns, and no tax is payable on money withdrawn from the scheme. Cash and a broad range of investments can be held within the arrangement, and there is no restriction on when or how much money can be withdrawn. Since 2017, there have been four types of account: cash ISA, stocks & shares ISA, innovative finance ISA (IFISA) and lifetime ISA. Each taxpayer has an annual investment limit which can be split among the four types as desired. Additionally, children under 18 may hold a junior ISA, with a different annual limit.

An individual retirement account (IRA) in the United States is a form of "individual retirement plan", provided by many financial institutions, that provides tax advantages for retirement savings. It is a trust that holds investment assets purchased with a taxpayer's earned income for the taxpayer's eventual benefit in old age. An individual retirement account is a type of individual retirement arrangement as described in IRS Publication 590, Individual Retirement Arrangements (IRAs). Other arrangements include employer-established benefit trusts and individual retirement annuities, by which a taxpayer purchases an annuity contract or an endowment contract from a life insurance company.

A registered retirement savings plan (RRSP), or retirement savings plan (RSP), is a type of financial account in Canada for holding savings and investment assets. RRSPs have various tax advantages compared to investing outside of tax-preferred accounts. They were introduced in 1957 to promote savings for retirement by employees and self-employed people.

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The theory of decreasing responsibility is a life insurance philosophy that holds that individual financial responsibilities rise and then decline over the course of a lifetime and that life insurance amounts should reflect those changes. These responsibilities include paying consumer debts, mortgages, funding children's education and income replacement. It is promoted by proponents of term life insurance.

A self-invested personal pension (SIPP) is the name given to the type of UK government-approved personal pension scheme, which allows individuals to make their own investment decisions from the full range of investments approved by HM Revenue and Customs (HMRC).

A personal pension scheme (PPS), sometimes called a personal pension plan (PPP), is a UK tax-privileged individual investment vehicle, with the primary purpose of building a capital sum to provide retirement benefits, although it will usually also provide death benefits.

In Australia, superannuation or just super is the term for retirement pension benefit funds. Employees pay deductions from their wage or salary and employers make similar regular contributions. Most employees contribute to large funds, either industry funds run jointly by unions and employers, or retail funds managed by financial institutions. More than a million Australians have a self-managed superannuation fund.

A registered retirement income fund (RRIF) is a tax-deferred retirement plan under Canadian tax law. Individuals use an RRIF to generate income from the savings accumulated under their registered retirement savings plan. As with an RRSP, an RRIF account is registered with the Canada Revenue Agency.

Defined contribution plan Type of retirement plan

A defined contribution (DC) plan is a type of retirement plan in which the employer, employee or both make contributions on a regular basis. Individual accounts are set up for participants and benefits are based on the amounts credited to these accounts plus any investment earnings on the money in the account. In defined contribution plans, future benefits fluctuate on the basis of investment earnings. The most common type of defined contribution plan is a savings and thrift plan. Under this type of plan, the employee contributes a predetermined portion of his or her earnings to an individual account, all or part of which is matched by the employer.

A private pension is a plan into which individuals contribute from their earnings, which then will pay them a private pension after retirement. It is an alternative to the state pension. Usually, individuals invest funds into saving schemes or mutual funds, run by insurance companies. Often private pensions are also run by the employer and are called occupational pensions. The contributions into private pension schemes are usually tax-deductible. This is similar to the regular pension.

KiwiSaver New Zealand savings scheme

The KiwiSaver scheme, a New Zealand savings scheme, came into operation from Monday, 2 July 2007. Participants can normally access their KiwiSaver funds only after the age of 65, but can withdraw them in certain limited circumstances, for example if undergoing significant financial hardship or to use a deposit for a first home.

A locked-in retirement account(LIRA) or locked-in retirement savings plan(LRSP) is a Canadian investment account designed specifically to hold locked-in pension funds for former registered pension plan (RPP) members, former spouses or common-law partners, or surviving spouses or partners.

A tax-free savings account is an account available in Canada that provides tax benefits for saving. Investment income, including capital gains and dividends, earned in a TFSA is not taxed in most cases, even when withdrawn. Contributions to a TFSA are not deductible for income tax purposes, unlike contributions to a registered retirement savings plan (RRSP).

Target date fund Type of collective investment fund

A target date fund (TDF) – also known as a lifecycle, dynamic-risk or age-based fund – is a collective investment scheme, often a mutual fund or a collective trust fund, designed to provide a simple investment solution through a portfolio whose asset allocation mix becomes more conservative as the target date approaches.

A Personal Retirement Savings Account (PRSA) is a type of savings account introduced to the Irish market in 2003. In an attempt to increase pension coverage, the Pensions Board introduced a retirement savings account, that would entice the lower paid and self-employed to start making some pension provision. The intention was for PRSAs to supplement any State Retirement Benefits that would be payable in years to come.

National Pension System Trust is a specialised division of Pension Fund Regulatory and Development Authority which is under the jurisdiction of Ministry of Finance of the Government of India. The National Pension System (NPS) is a voluntary defined contribution pension system in India. National Pension System, like PPF and EPF is an EEE (Exempt-Exempt-Exempt) instrument in India where the entire corpus escapes tax at maturity and entire pension withdrawal amount is tax-free.

References

  1. ↑ "Statutes". publications.saskatchewan.ca. Retrieved 2022-03-29.
  2. ↑ Saskatchewan Pension Plan (18 February 2014). "How to: Become a member of SPP". Archived from the original on 2021-12-15 – via YouTube.
  3. ↑ "Home - Saskatchewan Pension Plan". www.saskpension.com.
  4. ↑ "CBC News - Sask. Pension Plan more than doubles annual contribution limit".
  5. ↑ "Contribution Amount History".
  6. ↑ "Transfers to SPP - Saskatchewan Pension Plan". www.saskpension.com.
  7. ↑ Saskatchewan Pension Plan (23 January 2020). "Transferring money to SPP" – via YouTube.{{cite web}}: CS1 maint: url-status (link)
  8. ↑ Saskatchewan Pension Plan (6 September 2016). "Investment term: compound interest". Archived from the original on 2021-12-15 – via YouTube.
  9. ↑ "Statutes". publications.saskatchewan.ca. Retrieved 2022-03-29.
  10. ↑ "Member guide" (PDF). www.saskpension.com. Retrieved 2022-03-29.
  11. ↑ "Funds facts" (PDF). www.saskpension.com. Retrieved 2022-03-29.
  12. ↑ "Funds facts" (PDF). www.saskpension.com. Retrieved 2022-03-29.
  13. ↑ "Member guide" (PDF). www.saskpension.com. Retrieved 2022-03-29.
  14. ↑ "Investments choice" (PDF). www.saskpension.com. Retrieved 2022-03-29.
  15. ↑ Saskatchewan Pension Plan (12 July 2016). "Why fees matter to your investments?". Archived from the original on 2021-12-15 – via YouTube.
  16. ↑ "History - Saskatchewan Pension Plan". www.saskpension.com.
  17. ↑ "Fund Performance History - Saskatchewan Pension Plan". www.saskpension.com.
  18. ↑ Saskatchewan Pension Plan (17 May 2021). "SPP: Retirement Options - SPP" – via YouTube.
  19. ↑ "Retirement guide" (PDF). www.saskpension.com. Retrieved 2022-03-29.
  20. ↑ "Variable Benefit guide" (PDF). www.saskpension.com. Retrieved 2022-03-29.
  21. ↑ "Pension Collection Options". www.saskpension.com. Retrieved 2022-03-29.
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