Ontario pension a recipe for disaster

Re PM disingenuous on pensions, Letter Aug. 17 I feel compelled to respond to William Solomon’s letter. His views are political rather than actuarial.

As an actuary since 1969, I would dispute the premise that we are not saving enough. This was shown in a study prepared for the C.D. Howe Institute by a respected Canadian actuary. But even if this premise were valid, it is well accepted that for every dollar taken by a government, private savings will drop by at least a dollar. So the ORPP could cause an actual decrease in retirement saving.

Next, consider the costs of administering the plan. The cost of the ORPP will be much greater than that of a private, company-sponsored plan. Assuming these costs will be taken from contributions, we will see a further erosion of retirement savings as the ORPP replaces more efficient private plans.

Solomon, as an actuary, would want to consider the investments of a pension plan for which he was the consulting actuary. Our premier has indicated that she expects the money to be “invested” in infrastructure. By this we can assume she means subways, streetcars and roads. These are no more investments than is a family car. They may be necessary but are expenses, not investments.

In estimating the benefits one may expect from the ORPP, actuaries must make an assumption as to the expected investment return. Subways do not grow in value and whatever value they may have is impossible to realize. This leads to the question: Where will the money to pay pensions come from? My guess is that an already over-extended government will have to borrow it.

The scheme will be a colossal failure and make the gas plants, eHealth and ORNGE scandals pale in comparison. Fred Thompson, Singhampton, Ont.