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The Common Good Retirement PlanA retirement security initiative for Canada’s nonprofit and charitable sector
OverviewMay 2019
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The problem
~850,000 Canadian non-profit sector workers do not have a
workplace retirement plan
47% of non-profit workers do not have stable, full-time work
$3,000 median savings for Canadian households age 55-64 without
workplace pensions
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What is the Common Good initiative?
Common Good is a project of a coalition of philanthropic foundations, nonprofit leaders, social-purpose businesses, and retirement security experts.
Our goal is to enhance retirement security in the nonprofit and charitable sector. Our main goal is to establish a high quality, nationally portable collective retirement income plan for the sector.
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Why does this matter?
Help workers retire with dignity after a lifetime
serving others
Reduce financial anxiety –a leading source of stress for Canadians – and build
financial resilience
Improve attraction and retention within Canada’s
not-for-profit sector
Reduce wealth inequality by serving a group that has
been underserved by traditional financial
services
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Funding coalition
Who is behind Common Good?
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Who is behind Common Good?
Steering Committee
Alan Broadbent
Founder and Chair, Maytree
(chair)
Rahima Mamdani
VP Human Capital, United Way Greater
Toronto
Liz Mulholland
CEO, Prosper Canada
Owen Charters
CEO, Boys & Girls Clubs of
Canada
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Who is behind Common Good?
Champions Council
Colette MurphyAtkinson
Foundation (chair)
Debbie Douglas OCASI
Alison BrewinVantage Point
Peter Chapman Responsible Investment Advocate
Adil DhallaCentre for Social
Innovation
John StapletonOpen Policy
Ontario
Franca GucciardiMcCall MacBain
Foundation
Tim JacksonSHAD
David MitchellCalgary Chamber
of Voluntary Organizations
Meghan MooreLoran Scholars
Foundation
Liz O’NeillBoys & Girls Clubs Big Brothers Big
Sisters Edmonton
Ann WheatleyCooper Institute
PEI
Penelope Rowe Community
Sector Council Newfoundland
Lee Rose Community Knowledge Exchange
Paulette SeniorCanadian Women’s
Foundation
Lindsay Huginholtz Sherk
Sport Matters
Richard ShillingtonSocial Policy Expert
& Researcher
James StauchInstitute for Community
Prosperity, Mount Royal University
Catherine Ludgate Vancity
Wanda Morris CARP
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Who is behind Common Good?
Expert Advisors
Edward WaitzerFormer Chair, Ontario Securities Commission
Keith AmbachtsheerDirector Emeritus, International Centre for Pension Management, University of Toronto
Technical &Operations
Partner
§ Mission-driven retirement security firm focused on expanding access to good retirement plans
§ Includes former executives from Canada’s leading public pension plans
§ Would serve as Common Good’s initial plan administrator
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BCON
SK / MB
ATLANTIC
QC
AB
TERRITORIES
81 Committed Employers
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Internationally recognized as an innovative portable benefit
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Process followed since public launch in May 2018
Sector consultation
Regional roundtables
National survey
Detailed consultation paper
7 cities
5 provinces
Employers
Workers
Pension experts
Sector leaders
Download at www.commongoodplan.org
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Common Good key features: contributions
too expensive
What we heard Proposed design
• Contribution levels are flexible for both employers and workers
• Can be either mandatory or voluntary for workers
• Minimizes compliance and administrative burden
73%
Main barriers to employers offering a plan
commitment is too financially risky
50%
consistency of funding / revenue
84%
Source: Pollara Strategic Insights, “Retirement Benefits and Security in the Non-profit Sector: Survey Results” (2018)
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Common Good key features: eligibility & portability
portability between jobs
What we heard
• Portable from job to job and into retirement
94%
can stay in the plan post-retirement
94% • Post-retirement options to turn nest egg into stream of income
open to all sector workers, including freelancers
• Open to sector employees, freelancers, and spouses
89%Sector workers said they want…
Source: Pollara Strategic Insights, “Retirement Benefits and Security in the Non-profit Sector: Survey Results” (2018)
Proposed design
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Common Good key features: structure and governance
plan legally required to act in your interest
What we heard
91%
Board of directors
Service providers (plan administration, investment
manager(s), custodian)
Not-for-profit corporation
overseen by expert board
79%
Sector workers said they want…
Source: Pollara Strategic Insights, “Retirement Benefits and Security in the Non-profit Sector: Survey Results” (2018)
All parties involved would have a fiduciary duty – a legal duty to put
member interests first
Proposed design
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Common Good key features: tax and benefits assistance
want help with minimizing taxes and maximizing government retirement benefits
What we heard
• Hybrid Group Tax-Free Savings Account (TFSA) / Group Registered Retirement Savings Plan (RRSP) structure
• TFSA to avoid Guaranteed Income Supplement “clawback”
• Help accessing Canada Pension Plan & Old Age Security
89%
not knowledgeable about government retirement
benefits (e.g. CPP, OAS, GIS)
44%
Source: Pollara Strategic Insights, “Retirement Benefits and Security in the Non-profit Sector: Survey Results” (2018)
Proposed design
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Common Good key features: investment choices and education
want investment choices that are professionally
selected
What we heard
• Investment choices selected by experts with a fiduciary duty to members, and specifically tailored for retirement
• Educational tools and supports tailored to the needs of sector workers
• Simple, digital-first member and employer service
78%
not knowledgeable about investments and retirement
planning
45%
Source: Pollara Strategic Insights, “Retirement Benefits and Security in the Non-profit Sector: Survey Results” (2018)
Proposed design
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Common Good key features: fees, costs and value
average cost of retail mutual fund1
The evidence• Much lower fees through
economies of scale, comparable to a large pension plan:
0.6% of assets member fee+$10/month employer admin fee
2.1%
Canada ranking in 2017 Morningstar survey on mutual
fund fees2
Sources: 1. Investment Funds Institute of Canada, “Monitoring Trends in Mutual Fund Cost of Ownership and Expense Ratios” (2017) 2. Morningstar, “Global Fund Investor Experience Survey” (2017)
Proposed design
AB/B-C+D+D-
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Lower fees make a big difference in the long run
Example of $150 invested monthly over 30 years
Common Good 0.6% + $10/mo
Fund 1.0% fee
$104,000
$99,000
Fund 1.5% fee
$93,000
Fund 2.0% fee
$86,000
Fund 2.5% fee
$79,000
*Assuming a 5% annual rate of return*The figures have been rounded for illustrative purposes
1919
How can non-profit employers participate in Common Good?
Supplement existing
workplace retirement
plan
Provide to all employees,
with employer contributions
Offer to employees on
a voluntary basis, without
employer contributions
2020
What next?
Seeking commitments-in-principle:
• Employers who will offer the plan (whether mandatorily or voluntary) to employees
• Public indication of support for the proposed plan, and intention to make it available to employees should it proceed
www.commongoodplan.org
Schedule a call
• Through commongoodplan.org• Or contact Connor Bays,
employer engagement lead, at [email protected]
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Recap
• A chance to help nearly a million workers
• A growing national coalition
• A proposed design based on extensive sector feedback
• Collective, non-profit retirement plans are more efficient
• Employer commitments to make the plan possible
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Appendix
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How is Common Good different than a traditional (e.g. defined benefit) pension plan?
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§ Defined benefit (promises a defined level of retirement income)
§ Risk of GIS clawback for lower-income members
§ Fixed member and employer contributions
§ Requires employer-employee relationship
Traditional DB plan
§ Worker must have relationship with participating employer(s)
§ If member terminates prior to retirement, value of accrued pension does not increase until potentially after retirement
§ Defined contribution structure with individual accounts
§ TFSA component to avoid GIS clawback
§ Flexible contributions for both workers and employers
§ Open to freelancers and other non-standard workers, as well as employees and spouses
§ Portable across Canada, even if member moves to nonparticipating employer (contributes through bank account)
§ If member stops contributing, assets continue to grow with investment earnings between the time a member stops contributing and starts their pension
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Non-profit, collective retirement plans deliver better outcomes
$810,000 per personNot-for-profit co-ops
with the necessary scale and scope offer the best hope of addressing the ‘too little value at too high a cost’ outcomes
- Keith Ambachtsheer, Pension Revolution
lifetime cost savings in a high-quality collective plan vs. a typical individual approach1
~$1M per person
efficiency difference between for-profit, retail plans and non-profit plans2
“
”
Sources: 1. Healthcare of Ontario Pension Plan, Ryerson Institute on Ageing, Common Wealth, “The Value of Good Pensions” (2018).2. Wilson Sy, “Measured Investment Inefficiency of the Australian Superannuation System” report to Australian Productivity Commission (2018).