“Systemic Failure” of Canada’s Private Sector Pensions:

“The Real Pension Conflict” (Peter Benedek, National Post, March 23, 2011, Letter to the Editor)

“Ronald Davis writes that defined-benefit plan deficits are due to: (1) regulations permitting benefit promises to employees without requiring the contributions necessary to safely meet the promises, specifically by permitting the discounting of liabilities with expected but unearned returns on assets (this is what I call the lunacy of regulatory and actuarial practice), and (2) conflict of interest between employers’ management and shareholders, for choosing the cheaper but riskier to shareholders approach for accounting for pensions in order to beef up managements compensation.

But Mr. Davis forgot about the real conflict of interest that is between employer/shareholder and employee, whereby the former groups conspire to underfund employees’ pensions to pump up company financial and stock prices on the backs of the employees, whose pension plan assets and deferred wages (pensions) are put at risk in inappropriate investments and insufficient funding.

Then to top it all off, Mr. Davies opines that “under insolvency legislation, most pension plan claims for payment of a deficit in funding are rightfully among the last to be paid” -that is outrageous! If DB plans were part of the employees’ compensation package and employees were prevented by the government from making RRSP contributions because of their “pension adjustment” (the fictional amount that the employer contributed to employees’ pensions), then that is what should be paid to them before other unsecured creditors are paid in insolvency, because pensions are deferred wages.”

“PRPP: An agreement to kick the can down the road and deliver more fees to Canada’s financial industry” (Peter Benedek, CARP Advocacy, December 2010)

“Based on the little information available at this time, the best that can be said is that it failed on all of the above four criteria. No compulsion or incentives to save, except compulsion to invest savings in products of an industry famous for its greed, and no mechanisms to manage longevity risk. And not even a mention on protecting the earned benefits of private sector pension beneficiaries in case of sponsor bankruptcy. The best assessment that can be offered of this plan is an F!

“Nortel pensioners’ activist offers potential solution”(Bert Hill, Ottawa Citizen, October 6, 2010)

“Peter Benedek, a former Nortel employee who runs the sensible webpage, has a potential solution for the Ontario government on what to do with the Nortel pension plan. He suggests letting the thousands of Nortel pensioners who get less than $1,000 in monthly income turn their stakes in the plans into annuities. This would allow Finance Minister Dwight Duncan to deal with his concerns that his Pension Benefit Guarantee Fund not be exposed to risk-taking by private money managers. It tops up pensions to the $1,000 limit…Benedek suggests that pensioners getting more than $1,000 per month could transfer their money into other retirement investment vehicles if they choose, including a professionally-managed fund that the official pensioner leadership still hopes will be accepted.”

“Ontario pension reform? What really needs to be done!” (Peter Benedek, CARP Advocacy, September 2010)

“The Ontario pension ‘reform’ is tinkering, while the federal/provincial finance ministers’ modest and gradual CPP enhancement is insufficient. Private sector Defined Benefit plans are essentially dead, but existing commitments must be met. What is needed is new retirement income system architecture, to replace the current pension schemes which are in systemic failure.”

“Is Your Pension at Risk?”(Liz Crompton, Good Times, January 2010)

She has some great quotes taken from the (federal regulator of about 10% of Canada’s pension plans) Office of the Superintendent of Financial Institutions (OSFI) websiteindicating that “Canada doesn’t have a national pension guarantee plan because such a fund “could reduce incentives for plan stakeholders to face, manage, and solve their problems themselves”; Ms. Crompton adds, again quoting from the website, that the OSFI “mandate is “to contribute to public confidence” in the country’s financial system.” She also interviewed me for this article as recommending people to: do more for themselves, understand what you’re investing your hard earned dollars and control what you can (spending, saving and investment costs).

“Pension crisis” (William Hanley, Financial Post, September 4, 2009)

Quoting Peter Benedek: “…the country’s private pensions are in “systemic failure” due to chronic underfunding, poor oversight and government inaction, among other problems.” Solutions: (1) “Bankruptcy and Insolvency Act be modified to provide priority for pension plan underfunding and other employee claims. After all, pensions are really deferred wages.” (2) “pension adjustment reversal is no relief because pensioners are older and unlikely to get jobs so they can contribute to an RRSP. Benedek says a refundable carry-back “tax credit” could be provided for those no longer working.” (3) “intergovernmental negotiations and interference in asset sales and repatriation to protect Canadian pensioners’ claims. “ (4) “in the United States and U.K. Pension benefit guarantees should be introduced for the first $55,000 of pension and Ontario’s guarantee of $1,000 a month should be honoured” (5) “employees and non-pensioners are allowed commuted value. The windup should be slowed and pensioners should be allowed the commuted value option and permitted to transfer 100% of the pension value into an RRSP invested into a low-cost professionally managed asset pool” (6) “radical reform is needed now. A new pension system model involving default enrolment, pooled investment management and longevity insurance, now available in the United States, should be introduced.”

“Absolutely nothing is free of risk”(William Hanley, Financial Post, November 1, 2008)

“The dangers facing many, if not most, private Canadian defined-benefit pensions plans have been well-known in pension industry and actuarial circles for some time. According to Peter Benedek, who runs the Website, the problems are many: pension plan sponsors taking contribution holidays to reduce expenses and prevent overfunding; underfunded and unimmunized portfolios; plans directed by administrators/ trustees challenged by potential conflicts of interest; and plans overseen by ineffective regulation and regulators. Benedek suggests changes that won’t cost the taxpayer, including bankruptcy legislation, regulatory changes, changes in governance, portfolio investment management changes, raising pension insurance levels, company relief and a new universal pension to augment the CPP.”

Retirement Finance:

“Expert Interview with Peter Benedek on Retirement Planning for Mint”  (Peter Benedek Expert interview at, October 2014)

 Read recent interview by of yours truly covering a wide range of topics: misconceptions around retirement planning (e.g. planning age for retirement, time diversification, active vs. passive, stocks in retirees’ portfolios, insurance, market timing, etc), when to start saving for retirement and trade-off vs. debt reduction, investments for retirement.

“Your last care package” (David Aston in Moneysense, December/January 2013)

“Save or insure? But is insurance the best way to cover long term care costs? Some experts- like Peter Benedek of and Fred Vettese, chief actuary at Morneau Shepell and co-author with Bill Morneau of The Real Retirement-argue you’re better off using the traditional approach of using savings and home equity. A key reason to buy any type of insurance is to protect yourself from catastrophic risk beyond what you can expect to cover from savings. But with government support available, Benedek and Vettese say it’s not a financial catastrophe if seniors need care but don’t have insurance. “LTCI doesn’t meet that simple hurdle,” says Benedek…If you opt for an LTCI policy that makes your final years more comfortable, remember it comes at the cost of lower income today or less savings for the future. If, say, you’re a woman of 65 and buy a policy with a premium of $5,000 a year, Benedek points out this may be the difference affording travel and other enjoyments and doing without. “Most people will say, ‘I’m going to take that chance and take the trip because I only have one life to live.'”…For these reasons, Benedek and Vettese argue you’re generally better off following the traditional approach of saving and using equity in your home to cover care costs should they arise. You can invest your savings in a balanced portfolio and draw from it at a sustainable rate. Meanwhile the equity in your home provides a financial reserve you can tap for health-care costs if the need arises. This strategy provides a dual protection against all the financial risks that come with growing old, not just care costs.”

“Ideas for an investor friendly financial industry in Canada” (Peter Benedek, CARP ActionOnline, October 2010)

“There is now consensus that Canada needs a major overhaul of its retirement income system. One of the key enablers of this overhaul is a more investor friendly financial industry. Let’s look at three changes which would go a long way to a achieve this: fiduciary responsibility, low-cost asset management with decoupled fee-only advice, and mutual rather than public financial corporate organizations driven by customers’ best interests.”

“Retirement Home 2.0”  (David Aston in MoneySense, Summer 2010)

Is Long-Term Care Insurance worth it?…(Peter Benedek) says he wouldn’t buy it for himself…it’s expensive for what you get. On average, the proportion of premiums that het paid back to you in the form of benefits is low, at about 50%. Not to mention that when you are ready to move into a retirement home, you may find that you may not qualify for a payout because the insurance company find that you are not frail enough. In general, Benedek adds, this kind of insurance is less critical for covering residential long-term care costs in Canada, anyway, because of the high degree of government financial support. Instead, he suggests putting the money you would have spent on long-term care insurance premiums in your nest egg, so you can use it for whatever need arises.”

“Nortel retiree prefers ETFs”(Larry MacDonald, Globe and Mail, December 4, 2009)

“Throughout my working career, I paid myself first using payroll deductions for savings,” he says. “When permitted, I invested in the RRSP and savings plans offered by my employer and always made sure to get the employer’s matching contribution.”

Advice: “Control what you can – saving, spending and cost. Get financially educated: Use asset allocation and rebalancing to manage market risk. Then figure out how to manage other key risks such as outliving your assets.”

“Play it safe with lifecycle investing” (Jonathan Chevreau, Financial Post, June 21, 2009)

“…insurance companies sell downside-protected segregated funds or variants such as GMWBs. But these still entail some stock market risk and, as Peter Benedek, a financial blogger says at, introduce counter-party risk and higher costs. Benedek says investors can follow Bodie and settle for a “smaller but more certain piece of cake,” but frets this may be hard to swallow for those who wish to have it all if they do all the right things.”

“Research on Annuities”(Peter Benedek (letter) CFA Magazine, July/August 2008)

“Ms. Trammell’s article did mention that “most insurance carriers were reluctant to separate their asset management expertise from their longevity protection capabilities,” yet this separation leads to exactly the product that a rational individual needs. Such products are slowly becoming available. A recent example is MetLife’s Maximum Income Version of its Longevity Income Guarantee—a $50,000 premium at age 55 will provide a $72,000 annual payout starting at age 85. So, individuals can have their cake and eat it too. They can buy longevity insurance for about 5–10 percent of their assets while investing and decumulating the remaining 90–95 percent!”

“Target-date funds miss their mark”(Shirley Won, Globe and mail, August 25, 2009)

“Peter Benedek, a financial services consultant who runs the website, said investors also forget that a packaged portfolio of funds can prohibit them from taking advantage of favourable tax treatment for different securities.

Mr. Benedek said that in order to cut down on costs and take advantage of additional tax benefits, investors can build their own portfolio with low-fee ETFs, and rebalance yearly.

A portfolio might include ETFs like iShares CDN S&P/TSX 60; iShares CDN Dex Universe Bond; and/or iShares CDN DEX Short-Term Bond; Vanguard Total Stock Market; and iShares MSCI EAFE, he said.”

“Retirement Finance: Benchmarks”(Peter Benedek, CSA News  October 17, 2007)

“A few months ago, I was discussing last year’s equity returns with a good friend of mine and he mentioned that his advisor did quite well, having returned 14%. Unfortunately, the corresponding index returned 18% over the same period. The various equity market indexes are measures of what returns were available to investors in the markets. Nowadays, with low-cost ETFs (Exchange Traded Funds), investors can reap the benefits of the available returns within a few tenths of a per cent of what the markets offer. How do you know that you are getting a fair share of the returns offered by the markets?”

Florida Property Tax Crisis:

“An Update on Snowbirds’ Florida Tax Crisis”(Peter Benedek, CSA News, May 24, 2008)

“Save-Our-Homes Amendment (SOH), introduced in Florida in the 90s to protect (homesteaded) seniors on fixed incomes from losing their homes, resulted in the exact opposite effect on seasonal-resident property-owning seniors. Property taxes levied on out-of-staters have risen to a discriminatory 3-10 times or greater than those paid by many of their homesteaded neighbours (some of whom actually pay little or no property taxes on lower-priced homes). The greatest beneficiaries of the Save-Our-Homes Amendment are some of the wealthiest longtime Florida residents, who have locked in tens of thousands of dollars in tax savings per year as a result of SOH.” “Property tax ‘reform’-related activities are a year-round contact sport in Florida. Snowbirds, so far, are the ones who get continuously slammed into the boards.” “Amendment 1, called by the Palm Beach Post, “Unneeded tax relief, not serious tax reform,” brings the following benefits to homesteaders: (1) doubling the homestead exemption from $25,000 to $50,000, thus heaping additional benefit on the already advantaged (voting) homesteaders (further off-loading hundreds of dollars per year from them onto…guess who…non-homesteaded part-time seniors, rental owners, businesses and even homestead-eligible first-time homebuyers), (2) “portability,” allowing homesteaders’ accumulated Save-Our-Homes (SOH) benefits to be ported when moving to a new property (entrenching discriminatory tax advantages of long-time homesteaders, at the expense of homestead-eligible first-time buyers, recently homesteaded property owners and renters). For snowbirds, it means a ridiculous 10% cap on property assessment increases for non-homestead properties (a joke in Florida’s real estate market where property values are in free-fall)”

“Snowbirds beware”(William Hanley, Financial Post, March 29, 2008)

“…the law is helping to extend the state property price bust and making Florida an unwelcoming destination for snowbirds who otherwise might buoy the state economy, the state made the situation worse. A new measure passed Jan. 29 — “Black Tuesday” to Benedek and like-minded tax insurgents — gives homesteaders even more of a break by increasing the basic exemption on their property evaluation to US$50,000 from US$25,000. To add insult to injury, the measure also gives homesteaders greater portability of their exemption when they sell and then buy a new property. “In effect, the people who needed the relief didn’t get any and the people who didn’t need relief got even more”.”

“Snowbirds say they get cold shoulder on taxes”(Interviewed by Geoff Kirbyson in The Bottom Line,September 2007)

“The voters who could stop the elected officials from having this very large increase in spending, they didn’t care. The snowbirds, who were shouldering the increased load, couldn’t vote. Politicians were pandering to voters, with sentiments along the lines of, ‘It doesn’t cost you more for services’”

“People are being forced to sell into a falling market”

“Snowbirds’ Florida Tax Crisis- Are Snowbirds still welcome in Florida?” (Peter Benedek, CSA news August 27, 2007) “It’s been called loony, outrageous, two-tier, discriminatory, confiscatory and worse. The bottom line is that Florida has a property tax system that is rigged against snowbirds and it is taxing many out of the homes for which they saved their entire working lives. If you are a property owner in Florida or are thinking of becoming one, read on to learn: (1) how “good intentions” got us snowbirds carrying a disproportionate share of Florida’s tax load, (2) how a flawed property tax system is about to be replaced by another flawed one  (3) why the out-of-control spending in Florida’s counties/municipalities has been left unchecked by voters  (4) possible actions that you may take to change the discriminatory tax system in Florida

“Snowbirds getting angry, organized”(Diane Francis, Financial Post, May 4, 2007)

“Canadians have billions of dollars invested in Florida real estate, and these “snowbirds” are victims of a two-tier property tax regime…”Snowbirds are angry. Many see themselves ripped off and others are on the verge of being unable to pay for these out-of control property taxes [on top of excessive insurance hikes due to hurricanes]. I’m not sure how all this will play out, but many are determined to fight. People are starting to talk about legal challenges and boycotts of businesses,” wrote Peter Benedek…”

“Tax system not just ‘loony’; to snowbirds it’s outrageous”Peter Benedek, Palm Beach Post, March 10, 2007)

“When individual voters’ tax increases are capped at a maximum of 3 percent a year and spending has no cap of any sort, then, by definition voters have no incentive to rein in the free-spending politicians, who just want to be re-elected. This is especially so when a large and growing portion of the Florida non-business property taxes are paid by non0homesteaders, the part-time residents.”


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