Ontario pension plan faces looming tax hike
The Ontario government says it will hike the province’s retirement income tax by more than $10 billion in a plan that would help keep it afloat as the province tries to balance its books.
The announcement by Finance Minister Charles Sousa came as the government faces a potential $2.5-billion tax hike in March that could add $6.2 billion to its budget.
The Ontario Public Service Employees Union (OPSEU) says it’s disappointed with the timing of the announcement, but says it is an important step in ensuring that the province can stay solvent.
The province has already announced the cost of a $1.4-billion pension plan that has been the envy of the provinces financial services industry for years.
The plan would cost an estimated $5 billion.
“It’s unfortunate that the government decided to wait until the spring budget to announce this new plan,” said OPPSEU president David Merette.
“This will be an opportunity for us to show that Ontario is the best place to retire, and the best state for working Ontarians.”
The plan was initially announced in May, but was delayed by the passage of the B.C. Budget, which had included $8.5 billion in increases in pensions.
But the plan has now been put on hold while the government examines the provinces fiscal plan.
It is expected to come out this fall.
“Ontario is not the best example for other provinces that have pension plans that are based on a guaranteed income,” said Pensions Minister Jim Karygiannis.
“We want to make sure that the plan is aligned with the Ontario plan, but we’re also working with our province to ensure that we are investing in our pension plans.”
Karygisons plan would also see the provincial government pay for the cost overruns in the last provincial budget, which saw the province raise $1 billion from other sources including a tax on foreign ownership of farmland.
Karygiens plan would provide an extra $100 million to the Ontario Retirement Pension Plan over three years, and $500 million over five years.
It would also increase contributions to the OPRP, which will contribute $7 billion to the pension plan over three and a half years, $4.5 million over four years and $3.5 on each year until 2023.
Kerygisens plan also calls for an increase in the retirement age from 62 to 65 and would increase the maximum number of pensions eligible to 62.
But Karygasis plan would cut the maximum contribution from $100,000 to $50,000 per year, and increase it to $70,000.
“The plan we are proposing would provide a much better retirement package than what we have currently, and I think that’s something we will be proud to announce,” said Merets.
The provincial government says the pension increase would be paid for through a “fiscal adjustment to the budget” and that a balanced plan will ensure Ontario has the resources to meet future financial needs.
“Our plan would create an additional $4 billion in net annual contributions to OPRPs and other retirement savings plans,” said Karygonis.
“In total, we estimate that we would receive $6 billion in additional contributions from other government programs.”