Nortel Pensioners Get Greater Choice For Their Pensions
McGuinty Government Offers Pensioners Flexibility, While Ensuring Stability
Ontario is giving Nortel pensioners greater choice and flexibility in managing their pensions.
Measures in the 2011 Budget responded to the request of Ontario Nortel pensioners to allow plan members to opt out of the pension wind-up process. Members who choose to opt out will be allowed to transfer the commuted value (current lump sum value including the Ontario Pension Benefits Guarantee Fund (PBGF) entitlement) of their pension to any financial institution that offers a life income fund (LIF).
Members who choose not to opt out of the wind-up will be offered their guaranteed pension annuity, plus their Ontario Pension Benefits Guarantee Fund entitlement, through the conventional wind-up process.
In the 2010 Budget, Ontario provided $500 million in the PBGF to help ensure Ontario Nortel pensioners would receive guaranteed pension payments. Through this support, Ontario Nortel pensioners will receive a higher pension than they would have if the government had not taken action.
The next stage of the wind-up process will begin next week when letters will be sent to pensioners notifying them of preliminary estimates for their pensions. The process includes a wind up report which is expected to be approved by the Superintendent of Financial Services by late 2012 or early 2013. After the report is approved, pensioners will receive notice of their final entitlement including the PBGF entitlement and will be able to choose between the LIF option or remain with their guaranteed pension annuity.The government is following through on its commitment to Nortel pensioners by ensuring they are protected and have choices available to them.
- A LIF is a type of registered retirement income fund purchased with money transferred out of a pension plan. Pensioners can manage LIF accounts and invest these funds as they see fit, subject to the legal restrictions in the Ontario Pension Benefits Act and Income Tax Act (Canada).
- The plan administrator overseeing the wind-up will ensure that pensioners have the appropriate information to make an informed choice about whether or not to opt out.
- In Ontario, the PBGF will help offset Nortel pension shortfalls.
- With PBGF assistance, the average Ontario retiree in the negotiated plan receives just over 94 per cent of their current pension. Without PBGF assistance, this average retiree would have received less - about 75 per cent of their current pension.
- Similarly, the average retiree in the managerial plan receives about 82 per cent of their current pension, including the PBGF. Without PBGF assistance, this retiree would have received less - approximately 69 per cent of their current pension.
- On March 8, 2011, the Superintendent issued the Order to wind up the Nortel pension plans, effective October 1, 2010. Effective last October 1, plan indexation was eliminated, increasing the funded ratio of pension benefits for Ontario service.
“Nortel pensioners asked for greater flexibility with their retirement funds, and the McGuinty government has delivered. This solution builds on the other support we have given Nortel pensioners and also respects choice and ensures that people have the information they need to make important decisions about their future.”