The Saskatchewan Pension Plan (SPP) has been called “Canada’s best-kept secret” and a “made-in-Saskatchewan success story,” with the potential to do for pension reform what medicare did for healthcare in the country. SPP general manager Katherine Strutt refers to it as “an overnight sensation that only took 28 years.”
The SPP was introduced in 1986 to help people save for retirement by providing them with a cost-effective investment alternative. The plan was originally marketed as a homemaker plan for farm families without access to a pension program, but over the years, it has also been adopted by small businesses and the self-employed.
The voluntary DC plan offers an alternative for people without a pension plan, including those with an uneven income stream, such as students or seasonal workers. It also gives working people full portability of pension savings between employers.
The plan is now the 27th largest DC plan in Canada, with more than $360 million in assets under administration and about 32,000 members. It is an agency of the Ministry of Finance and is governed by its own legislation. Another unique element is that the SPP doesn’t require employer involvement.
“Throughout our whole history, we’ve been different, and that’s created some opportunities and some challenges,” says Strutt. “We just don’t fit in the same box as other pension plans.”
When the plan was introduced nearly three decades ago, the government’s main goal was to provide more security in retirement. It offered matching funds of up to $300 and pre-funded annuities guaranteed by the government. The maximum annual contribution was $600.
In May 1992, the plan was cut as part of sweeping austerity measures during an economic downturn and shortfalls in government revenue. There was a public outcry, which led to the reinstatement of the plan a few months later, but without the government-matching program.
About 45% of members left the plan, and the SPP continued on its own without government funding. “It was really hard to stay relevant with a limit of $600,” said Strutt.
In late 2010, amendments were made to increase its annual contribution limit to $2,500 and align its tax treatment with that of other tax-assisted retirement savings vehicles. “$2,500 may not seem big for most plans, but for us, it was huge,” Strutt added.
Still, there are challenges. Because it’s a voluntary plan, Strutt said, the SPP must remind people that the plan exists and continually attract new members. Public awareness activities include everything from mass media advertising to trade show appearances.
When news of the pooled registered pension plan (PRPP) framework was announced three years ago, Greg Hurst of Greg Hurst & Associates Ltd. told Benefits Canada that the SPP has much in common with the PRPP, calling them both “welcome developments toward addressing the problem of private sector pension plan coverage.” And Postmedia News said the SPP might be the model for the future of pooled plans. “The province that introduced medicare and public auto insurance to Canada could soon be leading the way in pension reform,” wrote Bruce Johnston in December 2010.
Despite many changes, Strutt said the SPP will stay true to its mission to provide a simple and easy-to-use pension plan to individuals and small businesses, because the issue it was created to address still exists. People “simply aren’t saving enough for their retirement,” she added.
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