LIFS are NOT Government Money

LIFS are not government money!"

Article By: Bill Gleberzon and Judy Cutler, co-directors of Government Relations

CARP campaigns to unlock Locked-In Funds (LIF) in Ontario 100 per cent.

CARP, the Ontario Society (Coalition) of Senior Citizens’ Organizations and the Ontario Coalition of Independent LIF Holders have joined forces in a campaign to persuade the Ontario Government to unlocked Locked-In Funds (LIFs) 100 per cent. In the 2007 Ontario Budget the Government proposed to unlock them 25 per cent.

What is a LIF?
Joe leaves his job which has a corporate or occupational pension. The terms of the pension fund allow him to roll over his portion of the pension into a LIF – a form of pension in which the principle can only be accessed under certain conditions.
In some cases, the regulations force him to roll over only some of his pension into a LIF with the balance taken in cash which is assessed as part of Joe’s annual income and is taxable at the rate commensurate with the amount. In other words, a pension that may have taken him many years to accumulate is treated for tax purposes as one year’s salary!

Unfair? To say the least.

Or, Joe is told that if he elects to transfer his portion of the pension fund into a LIF, it is “suggested that you keep these funds separate from any other RRSP monies,” in the words of one corporate pension form. If Joe chooses this course, he eventually discovers what his pension officer didn’t tell him – he has no choice in the matter. Locked-in funds are locked-in – that is, they must be separate from any other RRSP monies since the principal cannot be directly accessed unless Joe can meet designated specifications. For example, if the total amount is below a certain amount (currently $17,480), Joe can withdraw all of it.

Or, if he can prove dire health or financial distress to a bureaucratic agency of the Ontario Government called the Financial Services Commission of Ontario (FSCO) he may be able to withdraw some or all of the principal – in the latter case especially if he can prove that his life expectancy is limited to two years. (As far as we know, the bureaucratic rules do not specify what happens to that money if the successful applicant lives beyond that designated time period!) However, if a LIF-holder’s total annual income is over $29,131, s/he cannot withdraw any funds on the grounds of financial hardship.

If he is successful in his quest, he must pay the Commission 2 per cent of the amount withdrawn (between $200 and $600) in order to offset the administrative costs which enabled him to get his money. CARP estimates that between 2003 and 2006 FSCO may have realized as much as $15.8 million for allowing applicants to have access to their own money.
Raising income from seniors who are certified by FSCO as vulnerable is despicable!
Moreover, as one of Canada’s leading tax experts, Professor Jack Mintz, pointed out, this bureaucratic procedure has proven unnecessary because only 52 of the 30,000 applicants to the FSCO between 2003 and 2006 were denied access, while 26,300 were successful. The others withdrew their application. (1)

Another option is that at age 71 Joe must withdraw a certain percentage of his LIF as mandated by the income tax act.

Joe’s most drastic option is to die.

If his/her spouse or common law partner is still alive, the latter can access 100 per cent of the balance in the LIF without having to pay any tax. Other heirs would be taxed.
On the other hand, if Joe is still alive at 90, he can access 100 per cent of his LIF.
Unlocking LIFs 100 per cent is not without precedent in Ontario. In 1999 sixty-one MPPs were given that right in regard to their Legislative pension. Some of these MPPs still sit in the Legislature.

In 2007 NDP MPP Andrea Horwath introduced a private members bill to unlock LIFs 100 per cent. Her Bill was supported in the Legislature by PC MPP Hon. Bob Runciman who was one of the fortunate 61 MPPs. He argued that it was only fair that all Ontarians should enjoy the same privilege that he does. CARP also endorsed Ms. Horwath’s initiative.

CARP and its allies do not begrudge those sixty-one MPPs for having this right. However, we do begrudge the fact that this right is not available to all Ontarians with LIFs.

Moreover, CARP proposes that the unlocked funds should be rolled into a RRIF in order to reduce the excessive income tax that was paid for by the Ontario taxpayers -- to the tune of $20 million - when the sixty-one MPPs had their LIFs unlocked 100 per cent.

The opposition to allowing if LIF-holders access to 100 per cent of their principal is mainly based on the belief that they will squander the money and become wards of the state. But no supporting evidence is given for this supposition. Such a concern was not raised in regard to the special sixty-one MPPs. Nor was it raised in Saskatchewan when that province unlocked LIFs 100 per cent -- and after five years there is no evidence to support this fear. Nor is it raised in regard to RRSPs or RRIFs. Indeed, paying additional income tax on withdrawn funds will naturally deter people from making excessive withdrawals.

In fact, unlocking LIFs 100 per cent will generate more income for Queen’s Park through income and sales taxes derived from withdrawals and expenditures. Moreover, it may also generate more funds through fees for financial institutions since ex-LIF holders could take more interest in growing their accessible retirement savings – as they do in regard to their RRSPs. It will also drastically reduce the paper work generated for financial institutions when they deal with LIFs.

Professor Mintz estimated that there may be as many as one million Canadians who have this sort of pension. If this estimate is right, then about 450,000 of them could live in Ontario since Ontario accounts for 45 per cent of our country’s population. However the actual number of LIF holders is unknown so there could be – and likely are – many more than these estimates suggest.

Unlocking LIFs 100 per cent will enhance the well-being, quality of life, dignity, security and independence of Ontarians who will no longer be in thrall to paternalistic, outmoded and unneeded policies and procedures because they will be in full control of their own retirement income—and destiny.

What can you do to help CARP win this battle?

Join with Malcolm Hamilton, one of Canada’s leading actuaries, and with Gordon Pape, one of our country’s most prominent financial writers (and a contributor to CARP’s magazine, CARP for the Fifty-Plus), to publicly support this campaign.

E-mail your local MPP, Premier McGuinty, Finance Minister Sobara and the Minister Responsible for Seniors Bradley as well as John Tory and Howard Hampton to express your endorsement. You can reach them all through CARP’s E-voice on this website. And ask your friends and family to do so too.

To sign a petition on Unlocking Locked-In Funds 100% that will be sent to the Ontario Government, please click on the link below.

(1) J. Mintz, “Unlock LIRAS,” National Post (FP Commentary), March 27, 2007 p. FP15
© Copyright 2007 CARP.ca
http://www.petitiononline.com/WRC101/petition.html

Our Response to the Star Article

Dear Rita Trichur,

My name is Grant Fleury.
I am with the Ontario Coalition of Independent LIF Holders, a
non-partisan group representing the interests of the estimated hundreds
of thousands of LIF Holders in Ontario. Our goal is to inform these
individuals of the current rules and regulations pertaining to their
locked-in funds and to thus lobby the government and political parties
to amend the current Ontario Pension legislation to allow 100% access
to locked-in pension funds at the earlier of either the normal
retirement date or age 55 and beyond as has been done in Saskatchewan
and to lesser and differing extents in other provinces in Canada.

I read your article with great interest as it certainly brings to light
the alarming reality of the incorrect perception of many
Canadians(Ontarians) of the belief they will have enough money to
comfortably retire on.

As you have duly noted from the report of the Canadian Institute of
Actuaries that there, in fact, is not enough money being set aside by
two-thirds of Canadians for their retirement years, there remains
another less written about subject that further compounds the dismal
financial reality of these future retirees.

Many of the people that were surveyed, no doubt, are in possession of
one or more forms of a locked-in fund known as either a LIRA, LIF or
LRIF, depending at what stage those monies are at in their transition
towards actual available dollars to the pensioner. Working to or past
65 will be, for most, the only option available in order to achieve
retirement independence if any of these type of locked-in funds are in
their retirement portfolio.

The reason I say this is simply due to the fact that although a
significant amount of people are in possession of these locked-in
accounts known as LIRA's, LIF's or LRIF's, most are unaware of the
highly restrictive rules and regulations they will face when they
expect to begin withdrawing from these accounts to supplement or
primarily fund their retirement years.

The message by institute president Normand Gendron "The message for
most Canadians in their early to mid-forties is they will need to save
more if they expect to enjoy an independent retirement," could and
should be amended to include or address the locked-in type of
retirement savings as a principle reason for having to work longer or
begin to save earlier and that those people who have LIRA's, LIF's or
LRIF's should be aware that they will be limited to a yearly access of
approx. 6.5% for LIF's or the market growth for LRIF's and thus had
better include this extreme limitation in their overall calculations to
toward their ultimate goal of financial independence upon retirement.

This information, or lack thereof, regarding LIRA's, LIF's or LRIF's is
grossly lacking in the general public and quite often is also not fully
understood by financial consultants or institutions' agents. Thus
owners of these type of locked-in accounts, more often than not, think
that when they reach fifty-five (55), they will have full unrestricted
access to their locked-in pension funds. They are shocked and outraged
when informed of these limitations as nothing could be further from
their perception than the archaic limits imposed by the regulators of
locked-in funds in Ontario.

Hence the statement "There is a gap between what Canadians are thinking
and what they are actually planning and saving." is in fact much larger
than the report suggests if some of these pension funds are of the
locked-in variety.

The statement "The problem is that boomers have neglected to save", is
not entirely the fault of the boomer. The real underlying problem is
the lack of disclosure by the large corporations and financial
institutions who have laid these people off over the last thirty or so
years, and failed to accurately inform them of the fallacy that the
settlements they receive in the form of locked-in funds are not as
useful as they are portrayed to be. Yes, they may seem large at the
time, but they are legislated to be doled out, at a non-linear rate,
over a period from 55 to 90 years of age where in fact the majority of
this money will never be fully accessible to the fund owner as less
than 1/2 of 1 percent of us will live to 90 anyway! The remaining
money, upon death, is immediately taxed at the beneficiary's taxation
rate since it is added to their taxable income for the year and heavily
taxed at a much higher rate. This more often than not repeated scenario
essentially results in a "worthless bag of cash" to the pensioner since
they will likely never see the bulk of their own money while alive and
a large and immediate tax grab for the government..

Unless the existing pension legislation is changed in Ontario, and
Canada for that matter, Canada's public pension system will be relied
on even further to supplement the shortfall of future retirees with
locked-in pension funds as a result of their paltry access.

"The government will provide you with a base support system that will
keep you just above the poverty line – but that's all," said Robert
Brown, an actuarial science professor at the University of Waterloo,
who worked on the study.

This is precisely one of the principle reasons why we, the Ontario
Coalition of Independent LIF Holders, are advocating the abolition of
the restrictions regarding the limits to access of these locked-in
funds and thus allow the owners full 100% access to their funds upon
reaching the qualified age. In conjunction with CARP, and a number of
other well known and highly regarded and respected individuals in the
field of economics, we are currently and vigourously pursuing the
political parties, including the current Liberal party, to remove these
restrictive limits and provide full access as was done for all
residents in Saskatchewan a few years ago and was also done exclusively
for 61 MPP's in Ontario in 1999 via a special discriminatory amendment
for sitting members of the legislature contained in Bill 27(1999). We,
the remaining Ontarians, are insisting on equal and fair treatment as
was afforded the 61 MPP's in 1999 when they exclusively legislated
themselves a 100% unlocking privilege when their pension plans were
also previously wound up and they too were subsequently left with
similar locked-in pension plans.

All of the findings that you have pointed out in your article are in
fact worse than they appear to be on the surface if some of the pension
ear-marked money is of the locked-in variety.

As I've stated earlier, most people surveyed by our group, are unaware
of the restrictions to access they will face when they begin to
withdraw and are shocked when they are referred to the FSCO and the PBA
in Ontario to determine these extremely low percentages for withdrawal
rates and restrictions that they are being limited to.

The statement, "According to Statistics Canada, about 9.4 million
households had some form of pension assets in 2005." again is important
to note that depending on which type of pension fund or account that an
individual owns will largely change the number of years each person
will have to either start to save earlier or work later to in order to
achieve that comfortable level of retirement that most of us are saving
for.

Defined contribution type pension plans are a way for companies to not
only slash costs but to put the onus on the individual to manage their
own retirement with the companies defined monthly contribution to their
employees pension regardless of the strength or performance of that
employee's respective company.

In addition to the statement, "The study also recommended that Ottawa
consider making interest paid on residential mortgages tax deductible,
as it is in the U.S., given the high percentage of Canadians who may
need some portion of their home's equity to provide adequate retirement
income.", there should also be a recommendation to eliminate the locks
on all locked-in pensions upon the qualified retirement date and thus
provide the entire population a greater access to their own retirement
money thereby allowing them the flexibility to greater managerial
control over their entire pension strategy and subsequent level of
financial independence.

Sincerely,

Grant Fleury,
Ontario Coalition of Independent LIF Holders

Article in the Toronto Star

Millions face old-age poverty

http://www.thestar.com/article/225446







Jun 14, 2007 12:52

PM RITA TRICHUR; BUSINESS REPORTER

Two out of three Canadians expecting to retire in 2030 are failing to save enough money to cover basic household expenses in their golden years, says a new study released today by the Canadian Institute of Actuaries.

The report, “Planning For Retirement: Are Canadians Saving Enough?,” warns the greying baby boomer generation to either scramble to sharply increase their annual savings or plan to work past age 65 to avoid financial hardship.

"The message for most Canadians in their early to mid-40s is they will need to save more if they expect to enjoy an independent retirement," said the Institute's president, Normand Gendron.

"Governments need to provide Canadians with more education about the role that different savings vehicles can play in generating retirement income, and provide tools and incentives that encourage more households to save."

Canada’s public pension system is not intended to provide all the income needed for an independent retirement, the study said, noting it is only geared to replace about 40 per cent of gross income for households earning the average industrial wage, which was about $40,000 in 2005.

Canadians must act fast to build on this income through some combination of workplace pension plans, registered retirement savings plans, home equity and personal savings, it added.
In fact, actuaries determined a 40-year-old single person earning about $40,000 would need to save as much as 20 per cent, or $8,000, of his or her gross income every year for the next 25 years to cover necessary expenses in retirement. The study found that only a third of Canadian households are currently on track.

The study's findings stand in sharp contrast to a recent opinion poll by Pollara Inc. that found 55 per cent of Canadians aged 40 or older feel some level of confidence that they will have the financial resources to retire comfortably.

Those with retirement savings feel more confident, as do those with a workplace pension plan. Three out of four people surveyed said they plan to retire at or before age 65.

A Letter to the Leader of the Ontario PC Party

Dear Mr. Tory,

My name is Grant Fleury. I am a resident of Sudbury.
I sent you a personal email back on Jan 17, 2007 and have not received
a reply or acknowledgement.

As indicated in that previous email, I have been lobbying the
provincial government to eliminate the locks from locked-in pensions
since 2004 when I discovered the limits to access of my own pension
money when I qualified to retire. I have since written articles in
local newspapers in Ontario and have been recently interviewed on the
CBC in the past few months regarding the unrealistic limits of the
current regulations of the PBA and of the discrimination of Bill 27 in
1999. Others in Ontario have also been working diligently to inform the
public of the truth and senseless arbitrary bureaucracy surrounding the
administration of locked-in pensions.

The recent announcement regarding amendments to the Pension Benefits
Act of Ontario by the Liberal government including a 25% unlocking
option, although positive steps in the right direction, do not go near
far enough to address the inequity of the two distinct classes of
citizens that were essentially created by the former Progressive
Conservative party.
As you are very well aware, Bill 27 (1999) and it's infamous
amendments, including the creation of a special exclusive group of 61
MPP's allowing a full transfer of the commuted value of their former
terminated "gold plated" pension plan to a group RRSP format bypassing
all the rules, regulations and limitations, continue to plague every
other ordinary Ontarian. Restrictions and limitations that continue to
restrict their ability to choose the level and style of retirement as
often dictated by conditions other than the "six conditions of
desperate hardship" amendments added in 2002 by the former ruling PC
party.

I agree that all pension ear-marked money should be off-limits until
the normal retirement age or 55 is reached, since it is intended for
retirement.

I agree that there may be a large number of people in the province that
do not have the financial knowledge to deal with their designated
pension assets. We have financial advisors for that purpose, just as we
have plumbers for plumbing and builders for building.

However, rather than assuming we are all inept in that area, unlike the
belief your previous PC party and the current Liberal party have of
themselves, you should adopt a positive approach of providing an
education for those that may stray instead of painting all Ontarians as
financially irresponsible. Maintaining such an attitude as this is
again shear arrogance on any level in any government.

I disagree, as supported by Statistics Canada, with the unrealistic age
of 90 used in calculating the yearly payment for these locked-in
pensions. The facts are simple - less than 1/2 of 1% live till 90. Life
expectancy is 77.2 years, not 90! Pick up any newspaper and read the
obituaries if there is any doubt.

I agree with the Saskatchewan government's lead to 100% unlock all
locked-in pensions for their residents in April of 2002 providing
retirees with more flexibility in managing their own financial affairs.
Your former PC party was ahead of their time in 1999 and had already
positively accomplished this with the grave exception that it was done
selfishly, exclusively and quietly, for all "members only" of the
legislature.

Moreover and more importantly, regardless of any of the above, and as a
direct result of the deceit and inequity of Bill 27, the basic
principle of equality for all Ontarians was broken!
This is why I, and all the other groups and organizations in Ontario,
such as CARP, are insisting on 100% equality and nothing less. If it's
good for 61, it's good for the estimated million others in Ontario who
have locked-in pensions in one form or another.
Every life is as important as the next, as is every law equally applied
for every citizen. The foundation of any true democracy is equality for
all members in it's society.
If that special deceitful exclusive provision for MPP's hadn't been
born in Bill 27, we would now be debating the merits of unlocking and
not the injustice of a misapplication of democracy, which would
probably lead us into other areas of discussing the pros and cons of
the unlocking issue.

But the reality is that "democracy" or lack thereof in this case, has
been broken and you, as party leader, and your members have inherited
this injustice.
It's now up to you to lead by example and show true leadership and
honour toward the people that you govern and re-apply that basic
principle of "EQUALITY' in our democratic society for which Ontario,
and Canada for that matter, were founded upon!

The 25% unlock amount, recently introduced, should be and could easily
be 100%. You and your party must come to terms with the simple and
missing notion of equality for all in a basic democracy where
discrimination amongst a people is totally unacceptable in every aspect
of it's application.
Condoning and upholding a paternalistic and arrogant attitude, with the
unwarranted belief that only 61 MPP's are capable of making sound
financial decisions and being the only ones to have that unique right
to manage their finances as they see fit, is an extremely disrespectful
position for you to assume to defend if you choose that route.

We, as parents and role models, are trying to teach our children about
equality and model that behaviour in our own daily lives within our
family unit. Previous generations, who worked much harder physically
with their hands, than we do today, had a much simpler way of life than
those of us experience today. I can't pick up a paper today without
finding some form of corruptive behaviour or deceit within one or more
levels of the people who govern us. Bill 27 was another stellar example
which was done purposely with intent to exclude and favour a select
few.
Seniors and retirees are astonished and outraged as they learn of this
deceitful act by the former PC party. Our forefathers escaped such
types corruption and severe arrogant control in their homeland to come
to Canada to start over with a clean slate and founded a great nation
based on the simple fundamentals of fairness and equality for all
citizens, regardless of origin.
Mr. Tory, you, being in and around my generation, no doubt were raised
with similar values as those used to create this great province and
nation.
You must do the right thing and make Ontario equal again.
I am fairly certain that you would never allow yourself to run your own
family in an undemocratic style where some would be privileged 0%, some
25% and some 100%. The honour and principles displayed in a family
should be the same type of honour and principles applied by governments
toward all it's constituents.

Bill 27 is a disgraceful slap in the face and an affront to basic
democracy in any society. You know it and so do I, along with every
Ontarian that has learned about this grave injustice created by the
previous Conservative government. The Liberal party with it's recent
budget announcement is continuing, albeit now at 75%, to insult and
disrespect the public by maintaining a paternalistic control of Ontario
retirees personal pension money.
Don't take my word for it, be honest and truthful and ask those around
you that know of Bill 27, what they think of this inequality and
injustice where two sets of rules govern certain individuals in our
province in extremely different ways regarding their same or similarly
commuted pensions.

You cannot, nor should not, ignore this inequity that was created by
your predecessors.
There cannot be any such thing as 25% or 50% or 75% more equal. Equal
is exactly what it means - 100% the same for everyone regardless of who
you are or your chosen vocation.

The former ruling Conservative party recognized the restrictive and
unrealistic paternalism of the PBA in 1999 and rightly so! As amazing
as this may sound, they in fact did the right thing to get as far away
from those regulations as they could as they all realized how
restrictive, insulting, and demeaning they were. The only HUGE mistake
they made was that they should have amended the act to include ALL
Ontarians thus upholding the basic principal of equality in our
province.

Mr. Runciman was more than well justified and showed true democratic
representation by standing up in support of Ms. Horwath's Bill 175 to
fully unlock locked-in pensions allowing all Ontarians the same 100%
unlock privilege that was afforded him and the other 60 members of the
legislature in 1999! This man truly realized the error of his previous
government and had the courage to come forward and admit a mistake.
This is an unbelievable accomplishment in light of the endless "blame
the other party" that more often than not pervades the legislature
during question period.

You sir have the unprecedented opportunity to correct the former
Conservative mistake and proudly own that accomplishment for yourself!

You will have the support of every locked-in pension holder in Ontario
at the upcoming election if you announce your guaranteed intention to
fully unlock and transfer locked-in pensions to an RRSP format at age
55 or the normal retirement date.
I assure you, as I continue my campaign to inform Ontarians of the
deceit and inequity of Bill 27 and the unrealistic and archaic
restrictions of the current rules and regulations of the PBA, there
will be hundreds of thousands of voters anxiously awaiting your
intentions regarding the locked-in issue by the time the election takes
place. The quality of retirement, and for those already living on the
edge, in their remaining years, are largely in your hands.

You and your Conservative party must now, in true and honourable
democratic fashion, insist on extending the privilege of those that
have benefited from the previous Conservative party's Bill 27 to
include the rest of all Ontarians in the application of that same 100%
unlock privilege that was afforded to those 61 MPP's of all
affiliations in 1999.

For our youth and children's sake, show them by example, how a true,
fair and equally applied democracy works.

Seniors and Retirees of Ontario, who were the builders of this great
province deserve the respect they've earned from this current
generation and all others to follow.
They deserve to live out the remaining years of their lives in a
dignified manner with the fruits of their labours in a manner of their
choosing and not that of a faceless beurarcracy.

They are watching and they are listening.

Mr. Tory, you have an enormous opportunity to show the people in
Ontario the true power of democracy by correcting a horrible selfish
act made by the former Conservative government by issuing a simple
unequivocal statement of full support. All without costing the taxpayer
a single dime!

Now that's a powerful gift sitting in the palm of your hand.


People Inform People
Time Tells All
Knowledge is Power

Sincerely,

Grant Fleury
Sudbury

Article in the Kitchener Waterloo Record

PENSION PREDICAMENT
Locked-in pensions can block investors from accessing their own nest eggs
ROSE SIMONE





(Apr 21, 2007)
By the time Bill Nafziger retired after 37 years at Krug Inc. in Kitchener, he had a nice nest egg built up in his pension plan.

But three years later, at age 64, Nafziger, is fighting for the right to do what he wants with his own money.

The Milverton resident has joined CARP, also known as the Canada's Association for the 50-Plus, in lobbying the provincial government to give pensioners the right to withdraw money in what are commonly known as "locked-in" funds.

Locked-in pension funds are like regular RRSPs, but they are much more restrictive because they have maximums on how much money a person can withdraw.

With the principal in his defined contribution pension plan "locked in," Nafziger says he probably will die without being able to access the bulk of the pension money he worked for.

He adds that after he and his wife both die, whatever is left in the fund will to their estate and get taxed as revenue in one year, so the "tax man" will get a bigger bite of it.

"It's completely illogical," he says. "There is no reason why you shouldn't be able to unlock that money, and use it for yourself and your wife while you are living," Nafziger says.

No one knows how many people in Canada have money in locked-in accounts. The Financial Services Commission of Ontario, which is responsible for regulating pensions in this province, says it doesn't keep track of how many there are.

Jack Mintz, a University of Toronto business economics professor who himself has pension money in a locked-in fund from when he left Queens University, says it affects millions of people in Canada.

It includes people like Mintz who took their money out of a group pension plan when they went to work for another employer, as well as people like Nafziger who have individual pension plans rather than employer-administered group plans in which cheques are cut each month for retirees.

Under the financial services commission rules, if pension money isn't being managed by an employer pension fund, or by an insurance company that pays out a monthly income from a life annuity, it has to go into a "locked-in" account to provide a regular income over the years of retirement.

The amount a person can take out in each year after retirement is capped at a small percentage of what is in the fund. For example, at age 62, a person can take seven per cent of what's in the fund. That goes up gradually, to 11.9 per cent at age 79.

Nafziger says this means if he dies at around the age of 79, which is the age when the average Canadian man dies, two-thirds of his money would still be in the locked in fund.

As an industrial engineering manager at Krug, Nafziger tucked away more than $150,000 in his pension fund through personal and employer contributions over the years.

He knows he has to pay taxes on the money he takes out each year so he has no intention of withdrawing his entire retirement fund in one year.

But he says he should be able to enjoy more of the benefits of that money now that he is in a lower income tax bracket compared to when he worked for the office furniture manufacturer.
If the bulk of the money is left to his estate, governments will take a larger share of the funds in taxes, he says.

"If I die at the age of the average man in Ontario, there would still be about $100,000 left in that estate when it is unlocked," he says. "If I could take it out over the next 20 or 30 years in small amounts, I could realize a savings in income tax because I am taking it out at a lower income. But you are not allowed to take significant amounts all the way along."

CARP agrees with him. It is lobbying Ontario to follow the lead of Saskatchewan, which allows people to transfer all of their locked-in funds to registered retirement income funds that don't have maximum payout rules.

In its most recent budget, Ontario announced a provision, to take effect next year, that will allow for a "one time unlocking" of 25 per cent of the money in a locked-in fund.

Scott Blodgett, a spokesperson for the Ontario Ministry of Finance, says the government is trying to "balance the twin goals" of giving seniors more flexibility while still ensuring that there is a steady stream of income through retirement.

In doing that, Ontario will become one of four provinces that allows partial unlocking of funds, he says.

But Bill Gleberzon, a director of government relations for CARP, says that's not good enough.

"Our position is that this is an insult," he says.

The government's rationale for not allowing full unlocking appears to be based on the fear that pensioners will be irresponsible and spend all the money in one year, he says.

But Gleberzon says there is no evidence people would do that, and there is a huge tax penalty if they do.

"This is just outmoded paternalism that should not exist in the 21st century," he says.
Retirees can apply to the financial services commission to unlock their money for health reasons or financial hardship. But people who have more than $17,480 in locked-in accounts also have to pay the commission a fee of $200 to $600 if they succeed.

"So they have to pay to access their own money," Gleberzon says.

About 30,000 people applied to unlock their money between 2003 and 2006, and only 52 were turned down, says Gleberzon. If almost everyone who applies is allowed to unlock anyway, why should people have to go through this costly bureaucratic process in the first place, he says.

Gleberzon says CARP will continue to lobby the provincial government and make locked in pensions an election issue if necessary.

He says it is particularly galling to pensioners who are lobbying for unlocking that in 1999, the Mike Harris-led provincial government passed legislation that allowed 61 MPPs to unlock their pensions early and roll their money into RRSPs.

Gleberzon stresses that it is a matter of giving people access to their own money.

Nafziger agrees. "It's our money. It should be our decision what to do with it, not the government's decision."

rsimone@therecord.com

((((There needs to be a correction where it states)))) " But people who have (((more))) than $17,480 in locked-in accounts "It should read.Retirees can apply to the financial services commission to unlock their money for health reasons or financial hardship. But people who have (((less))) than $17,480. or do not have a income of more then $29,133. in locked-in accounts also have to pay the commission a fee of $200 to $600 if they succeed

John Tory, Leader of the Ontario Progressive Conservative Party

Hi John:

I just received this plus 10 other E-Mails on this subject. with a awful lot of articles about what the Conservative Party has done in the past.

I havent had a chance to read them all yet but I just skimmed through them and It is'nt nice.

I realize that You personally didn't have anything to do with this scandal but many of your current MPP's did.

Bill Costello

When is a pension not a pension? The Ontario Conservatives reformed the MPP's' pension plan, violating federal tax laws. The Conservatives had opinions from legal and accounting firms that the reform would violate federal tax laws. They violated the federal tax laws anyway. Revenue Canada requires large amounts of money be removed from the pension plan and is demanding that the 300 current and past MPP's pay taxes on the amounts as part of normal income.
Using the rational that:
"the government of Ontario has determined that it has a legal obligation arising from the errors that were made by its consultants"The Conservative government, that is, the taxpayers, will pay this tax. But the payment of the tax will also be considered income and it too will give rise to a tax liability. Presumably, the taxpayers pay these repeated increasingly smaller taxes levied on the MPPs by Revenue Canada giving rise to yet another demand by Revenue Canada ad infinitum.
Thee and me must pay tax on money removed from our pension plans. Mikey & Co. get it out free. MPPs can use this money in any way they like. Mikey, the guy who approved the scheme reaps the benefit. He gets his hands on a fat bankroll, estimated at $864,000 (tax free) just in time for his retirement. Eves got $810,000. Bob Rae, Floyd Laughren, Sean Conway and Jim Bradley got $1 million or more, each. Because of Ernie's fat benefit, which was his creation, the Liberals claim he had a conflict of interest and wants an investigation by the public accounts committee.
Eves claims that this is all trickery by the federal government. A more cynical take is that Mikey & Co. planned this. You would like a large tax-free lump rather than taking it out over an extended period and paying tax on it. Its only common sense

A Letter To the Leader of the Ontario Progressive Conservative Party

John Tory, Leader of the Ontario Progressive Conservative Party

Hi John:

I am Just dropping a line to see if you have made a decision on the issue of unlocking pensions. I receive a stack of E-Mail just about every day from people asking if a party has come forward to unlock these pensions .

Many of us in the defined contribution part of the pensions are beginning to wonder if there wasn't some kind of conspiracy with government and financial institutions to mislead the people of Ontario about these pensions.

So many of us were encouraged to invest extra money in these plans so as we would be able to have a comfortable retirement when we were retired. We were led to believe that these plans would become unlocked when we retire.
I received a letter yesterday from a gentleman in British Columbia and he said that he has a group of about a thousand people and they are going to start getting the word out in their province to start lobbying their government to unlock these pensions.
Before the Internet it was easy to keep people in the dark about how their pensions didn't unlock at retirement . Now it is very easy to get the word out and it is spreading right across Canada.

It will be very easy to encourage people to vote for the party that unlocks pensions 100% in Ontario . Pretty well insuring a victory for the party that stops this discrimination and cruelty to many people.

Isent it time to have a government in Ontario that respects the peoples whishes.

Below is a statement in 1997 from a MPP in the Ontario Legislature . It is now 10 years later and this unjustness continues.

Please Do the Right Thing and Unlock these Pensions Bill Costello

Excerpt from the HANSARD in 1997 (a MPP discussing locked-in pensions)

Let’s say Harry Smith worked 28 years for ABC company. Harry is a member of a defined pension plan. ABC company said, “Harry, you will be getting $1000 a month if you work for 25 years.” Harry’s got his 28 years in. Every month he get 5% taken off his paycheque. The company matches the 5% Harry Smith puts in, and that 10% of what he makes becomes a defined plan. Over 25 years it will generate so much money and he will get so much pension if he’s age 55, 58, 60.

There’s a real Harry Smith. He can be any one of us. He’s a person in my riding who worked for Noranda Mines for 32 years, was commuted got a little more than his $130,000 or $140,000 I was talking about. The person is in his late 50s, he has cancer. It’s a true story. He and his wife wish to go to Europe to see the place of his birth. He is pension-poor. Because of the locked in provision, he can only take 7.55% out each year and when he get to be 80, he has to buy an annuity. The insurance company is telling Harry, “But the money will be around.” And Harry is telling the insurance company “Yes, but I won’t be.” It’s his money. Yet we have someone else who has another self-directed RRSP, the same as Harry has, but his is not locked in. So they’re both subject to a minimum, but the locked-in one , because of the LIF, the life income fund only allows you to take so much out. You’re capped and it goes to the insurance company. It’s automatic. In the other plan you have a minimum through a RIF but you have no maximum. And the government are saying “We want the taxes”? Is this fair”

This is a growing monster. More and more people are being commuted, are being bought out, because companies do not wish to assume the liabilities and responsibilities of future pension plans. They don’t have the same flexibility they once had because of scrutiny about the surplus fund, so they’re under the gun and rightly so. What they choose to do as an alternative – and I’m not impugning motive. It’s not for me to say whether it’s right or wrong. A buck is a buck here. But excuse me, something has to be done. This is self serving. It is not right to deprive people of their money when it is rightly theirs. It is not consistent with other RRSPs, it is not consistent with your life savings, it is not consistent with your worldly possessions, ie., house, car, etc; only in this monopoly, in this cartel that represents an attitude of yesteryear.

Thankfully some provinces are beginning to exercise some flexibility. They see the light. There is a human dimension. It’s a good case. It’s a true story.

We are asking our constituent to write a letter, to the carrier explaining his dire need, accompanied by a certificate from the MD and the specialist to back his case so he can have access to the fruits of over 30 yers of service.

It makes no sense to me whatsoever. No one wishes to be unjust, but what are we supposed to tell Harry? “Tell you what Harry, go to the broker or go to whoever is carrying the plan and tell them that you want to transfer to an RRSP.” Don’t even mention the lock-in. Do it two or three times and then some clerk on a busy day in February, before the end of RRSP season, will be too busy and you’ll become legit. You can’t ask Harry to cheat. It’s not done. What about the consequences? Peiople get imaginative. You can’t ask Harry to take his money and run. He wants to pay his taxes. That’s one example of the need to address this legislation.

You say, “What would you do?” One proposal would be to treat it the same way as an RRSP and if you need some money – you might not wish to take everthing out of it. Unless you need it, it would be stupid, because the tax burden would be so high. Both Revenue Canada and Revenue Ontario would take their share, would take their cut. You may wish to take a little more, but providing you take the minimum – and now I understand and I don’t disagree with age 69 in lieu of age 71 – a little painful for some; not much of a window. It might go to 65, I don’t know. Mr Martin professes no ulterior motives. But again, with those people, sometimes they wish to access whatever pool of money.

1740

That’s not as troublesome as the locked-in provision, the straitjacket provision. My friend Harry Smith is locked in. They’ve locked him in. With a pension, they should have issued him a set of handcuffs: “Here, Harry. Welcome to retirement”

We’ll be on our feet again to talk about the pension proposals. I understand that some consultations are taking place. It say right here that consultation will take place with the pension community.

I’ll tell you what: I was outside the Legislative Assembly of Ontario, and it is right downtown. All you have to do is look up. I see all those towers. I see Canada Life. I see the banks; the business community is well represented. I hope that when we talk about the pension community – to me, the pension community is the person who feeds the engine, feeds the locomotive.

Yes, Harry Smith, that’s the pension community. It is his earned money; nothing else matters. It’s much easier, I suppose, to return the phone call from a person of consequence, a person whose name is recognized so easily, a person with money, a person in a high position. They take a cut. They’re not on the take; they take a cut. It’s fee for service. I don’t mind. Give Harry Smith the opportunity and the flexibility access a small dream, the lifestyle that they both worked for for so many years, decades, to enjoy. After all, it is their money. They’ve made the contribution in good faith. They too believed that one day it would be possible. Yet the present system does not allow that.