History – Physicians asked for this
OMA Insurance has created a group retirement savings plan for OMA members and their spouses/common-law partners – the Advantages Retirement Plan™.
The OMA asked members what they want and need to be ready for retirement. 93% of you believe that physicians, like others, should have access to a high-quality pension or group retirement plan, with 75% agreeing they would be interested in joining such a plan. 88% of you said you want to be able to contribute to your retirement plan no matter where or how you are working. 80% of you want flexibility to adjust your monthly contribution amounts.
Physicians need a new approach to retirement security that considers their specific needs:
Physicians are working and living longer
Physicians are working, on average, seven years longer than the average Canadian worker. In 2015, the median physician retirement age was 70, whereas the average Canadian worker retired at age 63. Many physicians can also expect to live longer than the Canadian average, especially as the number of female physicians continues to rise. Life expectancy among Canadian women is two to three years higher than it is for men. Women now represent over 40% of Ontario doctors as of 2017, up from 25% in 1995.
Physicians typically don’t have access to high-quality retirement plans
Traditionally, physicians have never had access to a group retirement plan as most are self-employed, and traditional pension plans require an employer-employee relationship.
Taxation changes for corporations have made retirement planning more difficult for physicians
Retirement planning has been the #1 reason physicians incorporate, yet federal tax changes have made retirement planning through a corporation more challenging.
The OMA listened – and that’s why OMA Insurance is offering the Advantages Retirement Plan™, a self-serve plan that offers OMA members and their spouses a way to build a foundational level of retirement income with:
- Lower investment management fees
- Contribution flexibility
- Guaranteed lifetime income
- Expert management and a governance structure to act in the best interests of plan members
- An easy-to-use online platform with digital tools and educational resources to help plan members make crucial retirement decisions starting from early in their career through to their retirement years
The Advantages Retirement Plan™ can help you reserve the retirement that you deserve.
 The survey was conducted through the OMA’s ThoughtLounge on February 7-14, 2018. A random sample of 10,181 physicians was invited to participate.
 Statistics Canada, CANSIM Table 282-0051.
What is the Advantages Retirement Plan™?
The Advantages Retirement Plan™ is a group retirement savings plan established exclusively for OMA members and their spouses/common-law partners, brought to you by OMA Insurance. The plan is accessible through a self-serve online platform that assists with key parts of retirement readiness: saving, investing, and retirement income.
Preparing for retirement is more than making good investment choices for your retirement savings. It also means you’ll likely need to:
- Set a target retirement income
- Ensure adequate and regular savings
- Factor in government benefits
- Know how to turn your nest egg into steady monthly retirement income streams
- Protect yourself against risks post-retirement (e.g. longevity risk – the risk of outliving your savings – and market risk)
The online platform for the Advantages Retirement Plan™ provides you with education and tools to help you prepare for your future retirement today.
The Advantages Retirement Plan™ is:
A retirement plan that puts physicians first
93% of OMA members believe that a group retirement plan should have a legal duty to act in the best interests of its members. OMA Insurance has a fiduciary duty to act in the best interests of plan members in overseeing the Advantages Retirement Plan™. The plan’s Investment Committee, which includes physician representation, has a duty to put plan members’ interests first with respect to the selection of investment managers and the oversight of the program.
To help deliver the plan, OMA Insurance is working with the world’s largest asset manager BlackRock, annuity provider Brookfield Annuity Company, and retirement expert Common Wealth.
Designed for every stage of a physician’s life
As your medical career grows, so do your income and assets. The Advantages Retirement Plan™ helps you understand how to prepare for retirement at different stages of your career and life.
When you’re starting out in your career, you can build a habit of saving early, which is a key factor in retirement preparedness. As your practice becomes more established and grows, you can use the plan to stay on track to reach your target retirement income. You can also begin protecting yourself against post-retirement risks (e.g. longevity risk – the risk of outliving your savings – and market risk) by opting to purchase some guaranteed lifetime income through the plan.
The Advantages Retirement Plan™ can be helpful for physicians nearing or in retirement. You will have the choice of guaranteeing a portion of your retirement income for life through an annuity, which is an insurance product.
Learn more about what the plan is – and what it isn’t.
A plan for physicians and spouses
Retirement planning is a family affair, so that’s why the Advantages Retirement Plan™ allows spouses/common-law partners of OMA members to join.
A spouse contributing to their own Tax-Free Savings Account (TFSA) and Registered Retirement Savings Plan (RRSP) will not have any impact on members’ contribution limits. Under the TFSA and RRSP rules, each person has their own contribution limits and is tracked separately by the Canada Revenue Agency (CRA).
What are my fees?
When Canadians look to invest their retirement assets in the retail market, the most common product they turn to is mutual funds. What they may not realize is that Canadian mutual fund investors pay among the highest investment fees in the world (2.1% on average). Particularly in an era of lower expected returns, excessive fees can make a significant dent in your retirement planning, eating up 30% or more of your retirement savings.
Keeping investment fees low, the plan helps your savings go further. The Advantages Retirement Plan™ fees are in line with those of large pension plans and are two to three times less than what most Canadians pay to invest their retirement savings.
What are my fees, and what do they cover?
Plan members pay a fee of:
- 0.6% of assets (+HST) (0.15% of the asset fee will be paid to OMA Insurance for cost recovery and services); and
- $10/month (+HST)
Certain transaction processing such as withdrawals or transfers out may incur additional, one-time fees (+HST).
These fees are used to cover the costs of the plan and go towards:
- OMA Insurance’s costs for setting up and running the Advantages Retirement Plan™, providing education and support to plan members, ensuring strong plan governance, and evolving the plan over time
- Common Wealth’s fees for administering and managing the plan, as well as providing and maintaining the technology for the plan’s online platform
- BlackRock’s fees for providing target date fund options in the program
- CWB Trust Services’ fees for providing custodial and trustee services for the plan
If a plan member chooses to purchase an annuity starting at age 50 to receive some guaranteed lifetime income, the member would pay premium rates (updated quarterly to reflect changing market conditions) that are inclusive of a one-time commission of 1%, distributed to OMA Insurance, the broker of record, over three years at a fee of 0.33% per year on premiums paid. The commission on annuities is charged in lieu of the 0.6% annual fee, which is only applicable to non-annuity investments through the plan. The cost to purchase an annuity is based on your age and sex, the insurer’s assumptions about longevity, and economic factors like interest rates.
How do Advantages Retirement Plan™ fees compare with other options?
OMA Insurance negotiated the Advantages Retirement Plan™ fees at considerably lower rates (based on global benchmarking data) than those typically charged by the average Canadian retail investment fund. For example, retail investors are charged 2.1% by the average Canadian mutual fund. In contrast, the plan provides BlackRock’s investment management services plus all other retirement services offered by the plan for its members for a total of 0.6% of member assets (+HST) (0.15% of the asset fee is paid to OMA Insurance for cost recovery and services); and $10/month per member (+HST).
- A physician with an average of $10,000 put into the Advantages Retirement Plan™ would pay $180 per year for end-to-end services compared to ~$210 per year if the same $10,000 were put into an average Canadian retail mutual fund.
- A physician with an average of $100,000 put into the Advantages Retirement Plan™ would pay $720 per year for end-to-end services versus ~$2,100 per year if the same $100,000 were put into an average Canadian retail mutual fund.
Advantages Retirement Plan™ fees are competitive even when compared to (and in some cases lower than) those of robo-advisors and other online investment solutions. Robo-advisors and other online investment solutions, however, only provide a few of the features that the Advantages Retirement Plan™ provides and are not tailor-made for retirement.
Why should I care about comparatively lower fees in the Advantages Retirement Plan™?
Small differences in fees can make a big difference to your pre-retirement savings and retirement income stream because of the effect of compounding.
The difference between paying average fees and fees offered by this plan could cost over $1 million in retirement income for a physician earning $200,000 before tax and after overhead. As illustrated below, the physician paying low fees ends up with over $685,000 more than the physician paying average fees by age 70, and over $1 million more by age 85.
- Physician with earnings of $200K before tax and after overhead
- Saves 15% of earnings from age 40 to 65
- Has already saved $200K prior to age 40, and transfers the $200K into the Advantages Retirement PlanTM
- Maximizes and uses RRSP contribution room each year, created by taking salary in the previous year, to save for retirement
- Winds down work to part time from age 66 to 69
- Full retirement at age 70
- In retirement, draws down enough from their account to replace 60% of their pre-retirement earnings (averaged over last 5 years before age 66 when part-time work starts)
- Gross investment returns at 5% per year
- 2% annual inflation
Low fees Average fees Difference Fee structure 0.6% of assets (+HST) and $10 per month (+HST) (similar to the cost of a large pension plan) 2.1% of assets (the cost of an average Canadian mutual fund) About 1.5% per year Projected nest egg size at age 70 $2,676,504 $1,982,117 $694,387 Projected retirement assets left at age 85 $1,125,305 Money runs out at age 83 $1,125,305 (plus approximately 2 additional years of retirement income) Projected retirement assets left at age 90 $107,490 Money runs out at age 83 $107,490 (plus approximately 7 additional years of retirement income)
 Investment Funds Institute of Canada, “Monitoring Trends in Mutual Fund Cost of Ownership and Expense Ratios” (2019)
 Morningstar, “Global Fund Investor Experience Study” (2019)
 CEM Benchmarking Database, Mike Heale and Paul Martinello, “Managing Costs & Optimizing Outcomes” in Saving the Next Billion from Old Age Poverty (2018)
 Morningstar, “Global Fund Investor Experience Study” (2019)
 Other assumptions include the following: 1) Physician defers Canada Pension Plan (CPP) until age 70 and receives some enhanced CPP benefits; 2) Physician receives no Old Age Security (OAS); 3) Contributions are made regularly throughout the year; 4) Earnings grow by inflation. These numbers are for illustrative purposes only and are based on a limited number of assumptions as stated.
 To maximize and use RRSP contribution room, the physician takes earnings in the form of a salary. For 2020, the maximum RRSP contribution room is $27,230; a salary of $151,278 from 2019 is required. Every year, the maximum possible RRSP contribution increases, as does the corresponding salary amount required to make the maximum contribution to an RRSP. Investment earnings while your savings are in your RRSP do not get taxed until you withdraw funds from your RRSP, in which case your withdrawal (you must withdraw money from your RRSP the year that you turn 71) will be taxed as income, except in a few special situations. Future TFSA and RRSP contribution rooms are estimated from 2020 onwards, assuming 2% annual inflation. See https://www.canada.ca/en/revenue-agency/services/tax/registered-plans-administrators/pspa/mp-rrsp-dpsp-tfsa-limits-ympe.html.
 Data from the Ontario Medical Association indicates that the median physician retirement age is 70.
 The 60% is based on an income replacement ratio of 60%, meaning that it would be 60% of the user’s pre-tax, pre-retirement income. The 60% figure is based on a study that economist Keith Horner conducted for the federal government, which found that higher-income individuals such as physicians require a lower replacement rate than the often-cited 70% figure. While this study recommended a slightly lower replacement ratio of ~53% for higher-income Canadians, it did not factor in out-of-pocket health care costs such as home care and long-term care, so for conservatism we assume a slightly higher number. See Keith Horner, “Retirement Saving by Canadian Households” (Finance Canada, Report for the Research Working Group on Retirement Income Adequacy, December 2009).
 The FP Canada Standards Council, which sets guidance for financial planners, suggests a gross return assumption of 4.99% for a diversified, balanced portfolio. See FP Canada Standards Council, “Projection Assumption Guidelines” (April 2019).
 0.15% of the asset fee will be paid to OMA Insurance for cost recovery and services. Certain transaction processing such as withdrawals or transfers out may incur additional, one-time fees (+HST). If a plan member chooses to purchase an annuity starting at age 50 to receive some guaranteed lifetime income, the member would pay premium rates (updated quarterly to reflect changing market conditions) that are inclusive of a one-time commission of 1%, distributed to OMA Insurance, the broker of record, over three years. The commission on annuities is charged in lieu of the 0.6% annual fee, which is only applicable to non-annuity investments through the plan.
 For more details on the typical costs of large pension plans, see Healthcare of Ontario Pension Plan, Common Wealth, National Institute on Ageing, “The Value of a Good Pension: How to improve the efficiency of retirement savings in Canada” (November 2018).
 The mutual fund’s industry association reports that the average total cost of ownership for actively managed mutual funds in Canada as 2.10%. See Investment Funds Institute of Canada, “Monitoring Trends in Mutual Fund Cost of Ownership and Expense Ratios” (2019).
Calculate Your Retirement Readiness
Are you ready to reserve your retirement? Answer a few simple questions and find out below. Once you’ve enrolled in the plan, you’ll be able to refine the numbers, as well as use additional inputs, for a more personalized calculation.
Assumptions and methodology
Retirement readiness calculator
Life expectancy assumptions are based on life tables provided by the FP Canada Standards Council. For users who indicate their gender as non-binary, we use the average of male and female life expectancy in the life tables.
Target retirement income is calculated based on a replacement ratio of 60% of the user's pre-tax, pre-retirement income. The 60% figure is based on a study that economist Keith Horner conducted for the federal government, which found that higher-income individuals require a lower-replacement rate. While this study recommended a slightly lower replacement ratio of ~53% for higher-income Canadians, it did not factor in out-of-pocket health care costs such as home care and long-term care, so for conservatism we assume a slightly higher number.
Government benefits are calculated as follows:
- For both Old Age Security (OAS) and Canada Pension Plan (CPP) benefits, we assume the user begins these benefits at the indicated age of retirement. If the indicated age of retirement is later than 70, we assume that the user begins OAS and CPP at age 70. If the indicated age of retirement is below 65, we assume the user begins OAS at age 65. Benefit calculations for both CPP and OAS are adjusted upward or downward to factor in this age, based on the factors used by the Government of Canada (for CPP, increase by 8.4% for every year past age 65 and decrease by 7.2% for every year before age 65; for OAS, increase by 7.2% for every year past age 65).
- For OAS, we assume the user lives in Canada for at least 40 years before retirement and during retirement. All users are assumed to receive maximum OAS unless their projected retirement income is above the level at which OAS benefits are clawed back, in which case we estimate the clawed back amount using rules provided by the Government of Canada.
- For CPP, we assume that the user has and will continue to contribute to CPP. For those users whose inputted incomes are above the Year’s Maximum Pensionable Earnings (YMPE), we assume they will receive maximum CPP. For those whose inputted incomes are below the YMPE, we adjust their projected CPP benefits down proportionally. The CPP projection incorporates the enhanced CPP, making a simplifying assumption that contributions before 2022 are subject to the base CPP benefit, and contributions in 2022 and beyond are subject to the enhanced CPP benefit. CPP benefits are assumed to be calculated based on the 40 years of income before a user retires.
To calculate the projected retirement income from both current savings and future savings, we use the following assumptions based on guidance from the FP Canada Standards Council:
- Investment returns, net of plan fees including management expense ratio, of 4.95% in the pre-retirement phase and 3.35% in the post-retirement phase
Retirement income will last until the age that the member has a 25% chance of living (based on the life tables described above), factoring in post-retirement inflation of 2.0%.
Suggested savings are calculated based on the savings required to fill any gaps between the target retirement income and the projected retirement income from government benefits and existing savings. We assume that monthly savings increase each year to keep pace with wage inflation.
All figures are presented in today’s dollars.