OMERS pension - Voluntary Contributions??

[Le Poisson]

Momma and I both work for Regional Government, and are eligible for OMERS (Ontario Government) pensions. Mine will kick in when I'm 64 (ugh) and hers when she is 60 (also, Ugh).

Within the pension framework, there is opportunity for "Additional Voluntary Contributions" or AVCs. These seem to work like an RRSP with a contribution cap, all invested in the Pension Fund, with a fixed MER (0.53%) and an annual fee of about $35.  They claim a historic earning rate in line with MMM expectations (6% or so).

While they don't allow you to retire earlier in the pension, they are another savings vehicle. Has anyone here used them, and are they any better than a traditional RRSP, held by a budget firm like Questrade with Vanguard funds for low MERs?

I don't like the withdrawal rules, and I don't like my entire retirement plan based on a given age (especially not 64-Ugh!) I'd much rather build wealth for an escape plan at 55 with the pension coming in as a welcome bonus later on. Using this logic, I see the AVS as a tool for 10 years or so, then pulling it all out as a lumpsum in a glorious moment of FU. Living off it until the OMERS pension kicks in, and then fading into the sunset while sipping Pina Coladas on Tortuga. Or something.

 

[Kaspian]

Are you sure that those ages are a certainty?  Most people end up calculating the age they need to get maximum from their pension.  (They call it "Factor 90" around here, but I can never remember what that means.)  I'm getting out the first year I can, with the smallest pension.  I used to be OMERS, but has it transferred to OP Trust when I changed jobs.  Most pensions are designed so you can start at 55.  It's not enough for most people to live on (well) but if you have a secret MMM 'stache you're gold and pension money is just extra gravy train, baby! 

Though the OP Trust site tells me I get my "good" pension at 60 (year 2030) and assumed that's what I'll be taking, fuck that!!  They have a (sort of hidden) calculator which will show all retirement options.   (See attached.)

Co-workers are going to call me crazy for not waiting for my full pension, but 5 years of freedom?  With an extra $20K in my pocket I won't even need?  Sayonara, suckers!!

[Le Poisson]

Yeah - I think we're talking the same thing.... Factor 90 is years of service plus age to total to 90. That has me retiring at 64. My sentiments match yours.

But within th epension there is the voluntary contributions, which looks like an RRSP at a cursory glance. That is the bit I'm wondering about. Like you, I would take a reduced pension if I can top up, and this looks like a decent vehicle. Just wondering if anyone else has looked into it.

[Kaspian]

There's a Canadian Mustachians group on Facebook.  Not sure if you're on that site?  It'd probably be a good place to ask. 

[RichMoose]

My gut says this decision really depends on how much "portfolio tinkering" you do. If you're a committed set and forget investor, it is cheaper to invest on your own. If not, well the AVC is an easy solution that will also provide competitive returns.

I was reading that CPP administration costs have sky-rocketed to almost 1% of assets annually. Are OMERS costs also creeping up? This could make a substantial impact over the years as well.

Depending on how close you are to retiring and your current salary, you might be better to invest outside of an RRSP rather than in it (for future tax reasons it's generally not too smart to run up a large RRSP portfolio).