Ontario budget promises pension flexibility

(May 12, 2005) The government of Ontario tabled its 2005 budget Wednesday night, trumpeting increased spending for education and healthcare, while holding the line on taxes.

While these are the headline items being heralded on the front pages this morning, buried deeper in the budget are provisions to offer pension fund managers more investment choices.

“This government is exploring ways to accelerate our infrastructure plan,” Finance Minister Greg Sorbara said in the budget speech. “We are looking at ways to encourage Ontario’s pension plans to invest more in building Ontario’s infrastructure rather than investing their money abroad.”

For large pension funds struggling to find suitable investments at home, more private-public partnerships (PPPs) could include the sell-off of existing infrastructure assets. Ontario drivers might expect freeways such as the 401 to follow the model of the 407 Express Toll Route.

The move is a departure from the Liberal party election platform. During the last election, Dalton McGuinty often criticized PPPs as “privatization by stealth” and as the first step in the “Americanization” of the healthcare system.

Also on the pension front, the Ontario government is proposing to harmonize pension standards with Quebec for plans with members in both provinces. Budget documents say this accord could be used as a template for nationwide harmonization.

The government also announced it would issue a discussion paper on the Jointly Sponsored Defined Benefit Pension Plans and the ways they conflict with the Pension Benefits Act, which was originally written with an eye to traditional, employer-sponsored DB plans.

Budget documents say: “Legislation to amend the PBA to address these issues will be introduced in the fall and, if approved by the legislature, it is expected that the changes will be in effect before year end. Amendments to the PBA Regulation would also be required.”

Filed by Steven Lamb, Advisor.ca, steven.lamb@advisor.rogers.com