CANADA - Employee contributions to the Ontario Teachers' Pension Plan (OTPP) will increase by 3.1% of base earnings starting 1 January 2007.
Currently, contributions are set at an average of 8% of earnings. The increases will see this rising to more than 11% by 2009.
The increases are due to be phased in over three years with employees paying an additional 2% in 2007, 0.3% in 2008 and another 0.8% in 2009.
This is the first employee contribution increase since 1990 and is being introduced by the Ontario Teachers’ Federation and the Ontario government in an effort to eliminate the pension plan’s funding shortfall in 15 years.
The shortfall came about after liabilities increased much faster than plan assets despite strong returns on investments.
In spite of the increase in contributions, the pension benefits are to remain the same. The raises will be partially offset by lower taxes, since pension contributions are tax deductible.
Meanwhile, the OTPP’s real estate arm, Cadillac Fairview Corporation, reportedly signed a deal to acquire a 46% stake in Multiplan Emprendimentos Imobiliaros, Brazil’s leader owner and operator of shopping centres.
The deal is witness to the pension fund promise to expand into foreign markets. “We see this as a good start,” Cadilla Fairview CEO Peter Sharpe was reported to have said.
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