The contribution and benefit preferences of active members of the Ontario Teachers Pension Plan Prepared for: by: June 2007
IV. Level of awareness and understanding among plan members about the current level of benefits and contributions 15
Awareness and understanding of pension plan benefits and contributions Prior to delving into pension plan members preferences in terms of contributions and benefits, a number of questions were asked of members at the onset of the questionnaire, the goals of which were: To understand members aided awareness of their pension provisions. To ensure that survey respondents were aware of current provisions before they answered more detailed questions concerning their benefit and contribution preferences. 16
Majority of pension plan members aware of each current pension plan provision tested Of the three pension plan provisions tested, members are most likely to be aware of the 85 factor, followed by the use of a formula to determine the amount of their pension, and inflation protection. 85 factor 9 Monthly pension amount based on formula 87% Inflation protection 7 0% 20% 40% 60% 80% 100% Qs 1-3. To start, I d like to read you a list of some of the provisions of your pension plan. Please tell me whether or not you were aware of each provision prior to my call. How about: (RANDOMIZE ORDER OF PROVISIONS) 17
Almost all pension plan members aware of 85 factor Almost all pension plan members (9) are aware that they can retire with unreduced monthly pension payments when their age plus number of teaching years equals 85, or when they reach the age of 65. Awareness is slightly lower among newer members (90%) and close to unanimous among older members, those within 10 years of unreduced pension eligibility, and those already eligible for unreduced pension. Unaware Aware 9 Career groupings Newer members (0 4.9) Newer members (5 9.9) Mid-career members (10 14.9) Mid-career members (15 21.9) (within 10 yrs unreduced pension) (within 5 yrs unreduced pension) (eligible for unreduced pension) Aware 90% 9 98% 9 98% 9 9 Q1. Please tell me whether or not you were aware of each provision prior to my call. How about: members can retire with unreduced monthly pension payments when their age plus the length of their teaching career equals eighty-five, or when they reach the age of 65. 18
Large majorities of all member segments aware of 85 factor Awareness is slightly lower among occasionally employed pension plan members (8). Member segment Aware OVERALL Gender Employment type Employer type Place of work Urban/Rural Female Male Full-time Part-time Occasional District school board English District school board French Elementary Secondary Urban Rural 9 96% 9 97% 9 8 96% 92% 9 96% 9 97% Less likely 19
Large majority of pension plan members aware of how their monthly pension is determined Almost nine-in-ten pension plan members (87%) are aware that their basic annual pension is determined through a formula. Awareness increases as members approach retirement, with almost three-quarters (7) of newer members (0-4.9 years) to almost all (9) unreduced pension eligible members being aware. Don t know Unaware 12% Aware 87% Career groupings Newer members (0 4.9) Newer members (5 9.9) Mid-career members (10 14.9) Mid-career members (15 21.9) (within 10 yrs unreduced pension) (within 5 yrs unreduced pension) (eligible for unreduced pension) Aware 7 8 9 9 96% 9 9 Q2. Please tell me whether or not you were aware of each provision prior to my call. How about: the monthly pension amount paid to a retiree is based on a formula that multiplies two percent by the years of service by the average of their best five annual salaries. 20
Awareness that pension amount based on formula widespread among all member segments Secondary school members (9) and men (9) are slightly more aware than average of how the amount of their pension is determined. Awareness is lowest among occasionally employed members (66%). Member segment Aware OVERALL Gender Employment type Employer type Place of work Urban/Rural Female Male Full-time Part-time Occasional District school board English District school board French Elementary Secondary Urban Rural More likely 87% 8 9 90% 8 66% 87% 8 8 9 87% 9 Less likely 21
Almost three-quarters of pension plan members aware that monthly payments are protected against inflation Almost three-quarters of pension plan members (7) are aware that monthly pension payments are protected against inflation. Again, awareness is higher among members approaching retirement. Just over half (52%) of newer members (0-4.9 years of credit) are aware of inflation protection, compared to 8 of mid-career members (15-21.9 years). Unreduced pension eligible members are almost unanimously aware that a guaranteed cost-of-living adjustment is made (97%). Unaware 2 Don t know Aware 7 Career groupings Newer members (0 4.9) Newer members (5 9.9) Mid-career members (10 14.9) Mid-career members (15 21.9) (within 10yrs unreduced pension) (within 5 yrs unreduced pension) (eligible for unreduced pension) Aware 52% 68% 80% 8 92% 9 97% Q3. Please tell me whether or not you were aware of each provision prior to my call. How about: The monthly pension payments made to retirees are protected against inflation. In other words, a guaranteed cost-of-living adjustment is made. 22
Inflation protection awareness widespread among most member segments Men (8) and secondary school members (8) are more likely to be aware of inflation protection, whereas occasional workers (5) and French school board members (6) are less likely to be aware. Member segment Aware OVERALL Gender Employment type Employer type Place of work Urban/Rural Female Male Full-time Part-time Occasional District school board English District school board French Elementary Secondary Urban Rural 7 70% 8 76% 7 5 7 6 70% 8 7 78% More likely Less likely 23
Majority of pension plan members are aware of other aspects of their pension plan In addition to testing awareness of plan provisions, members aided awareness of three other aspects of their plan were explored. More than six-in-ten members are aware of the lack of dental and health coverage in the plan, followed by the tax deductibility of their contributions, and contribution matching by the Ontario government. No dental or health coverage 68% Contributions are tax deductible 66% Government matches contributions 6 0% 20% 40% 60% 80% 100% Qs 4-6. Now I d like to ask you about some other pension issues. Prior to my call, were you aware or unaware 24
More than two-thirds of members aware that pension plan does not provide dental and health benefit coverage Over two-thirds of pension plan members (68%) are aware that their pension plan does not include dental and health benefit coverage. Again, awareness is higher among members approaching retirement. Less than half of newer members (4) are aware of the lack of dental and health benefits and just over three-quarters (76%) of mid-career members are aware of that fact. Members within five years or less of unreduced pension eligibility and those already eligible have an awareness level over 90%. Don t know Career groupings Newer members (0 4.9) Aware 4 Newer members (5 9.9) 62% Unaware 3 Aware 68% Mid-career members (10 14.9) Mid-career members (15 21.9) (within 10 yrs unreduced pension) (within 5 yrs unreduced pension) (eligible for unreduced pension) 7 76% 82% 92% 98% Q4. Prior to my call, were you aware or unaware that the pension plan does not provide dental and other health benefit coverage to retirees? 25
Majority of all member segments aware of lack of dental and health benefits Occasional workers (52%), French school board members (56%), and part-time workers (60%) are less likely to be aware that their pension plan lacks dental and health coverage. Member segment Aware OVERALL Gender Employment type Employer type Place of work Urban/Rural Female Male Full-time Part-time Occasional District school board English District school board French Elementary Secondary Urban Rural More likely 68% 68% 6 7 60% 52% 6 56% 67% 7 68% 68% Less likely 26
Two-thirds of pension plan members aware that money contributed to pension plan is tax deductible Two-thirds of pension plan members (66%) are aware that their pension plan contributions are tax deductible. Newer members, once again, are least aware (5), whereas members already eligible for unreduced pension score the highest (8). Don t know Career groupings Newer members (0 4.9) Aware 5 Newer members (5 9.9) 6 Unaware 32% Aware 66% Mid-career members (10 14.9) Mid-career members (15 21.9) (within 10 yrs unreduced pension) (within 5 yrs unreduced pension) (eligible for unreduced pension) 7 76% 7 7 8 Q6. And prior to my call, were you aware or unaware that the money you contribute to your pension plan is tax deductible? 27
Majority of all member segments aware of tax deductibility of contributions Awareness of tax deductibility is higher among men (7) and secondary school workers (7), and lower among occasional workers (56%) and French school board members (5). Member segment Aware OVERALL Gender Employment type Employer type Place of work Urban/Rural Female Male Full-time Part-time Occasional District school board English District school board French Elementary Secondary Urban Rural 66% 6 7 68% 6 56% 66% 5 6 7 66% 66% More likely Less likely 28
Majority of pension plan members aware that the Ontario government matches members contributions to the pension plan Almost two-thirds of pension plan members (6) are aware that the Ontario government matches members contributions to their pension plan. Again, awareness is lowest among newer members (4) and highest among those who are eligible for an unreduced pension (8). Unaware 36% Don t know Aware 6 Career groupings Newer members (0 4.9) Newer members (5 9.9) Mid-career members (10 14.9) Mid-career members (15 21.9) (within 10 yrs unreduced pension) (within 5 yrs unreduced pension) (eligible for unreduced pension) Aware 4 60% 70% 78% 7 78% 8 Q5. And were you aware or unaware that the Ontario government matches members contributions to the pension plan? 29
Majority of most member segments aware government matches contributions Men (77%) and secondary school members (7) are more likely to be aware of contribution matching. French school board members (4), occasional (4) and parttime (5) workers, women (58%), and elementary school members (58%) are all less likely to be aware of contribution matching. Member segment Aware OVERALL Gender Employment type Employer type Place of work Urban/Rural Female Male Full-time Part-time Occasional District school board English District school board French Elementary Secondary Urban Rural 6 58% 77% 66% 5 4 6 4 58% 7 6 67% More likely Less likely 30
More than six-in-ten members expect the value of the average teacher s pension to be $750,000 or less Members were told that the average teacher s pension at retirement, in today s dollars, is valued at $750,000. Almost two-fifths (38%) of pension plan members say this is about what they expected, whereas, 2 think it is higher than expected. Only one-in-ten (10%) say it is lower than expected and almost three-in-ten (2) don t know. Expectations are very consistent between career groups. Between 2 and 2 of each group say the $750,000 is higher than expected, -1 say lower, and 36%-42% say about the same as expected. Don t know 2 Higher 2 Lower 10% Career groupings Newer members (0 4.9) Newer members (5 9.9) Mid-career members (10 14.9) Mid-career members (15 21.9) (within 10 yrs unreduced pension) Higher 2 22% 2 2 2 Lower 10% 1 Same 36% 3 38% 4 37% DK 3 2 30% 28% 28% About the same amount 38% (within 5 yrs unreduced pension) (eligible for unreduced pension) 22% 22% 8% 42% 40% 28% 2 Q7. The value of the average teacher s pension at retirement, in today s dollars, is $750,000. Is this amount higher, lower or about the same amount that you expected? 31
Majority of all member segments say pension value same or higher than they expected Part-time (30%) and occasional (3) workers are more likely than average to say that the $750,000 value of the average teachers pension is higher than they expected. Men (47%) are more likely to say that $750,000 is about the same as expected. Member segment Higher Lower Same DK OVERALL 2 10% 38% 2 Gender Female Male 2 16% 8% 1 3 47% 32% 2 Full-time 2 10% 40% 2 Employment type Part-time 30% 30% 3 Occasional 3 1 30% 28% Employer type District school board English District school board French 2 1 12% 3 3 2 3 Place of work Elementary Secondary 2 1 10% 36% 4 30% 2 Urban/Rural Urban Rural 2 20% 1 38% 37% 2 30% More likely Less likely 32
Almost one-quarter of members believe they contribute to less than 12% of their before-tax salary to their pension plan Almost one-quarter (2) of members correctly believe that they contribute to less than 12% of their before-tax salary to their pension plan. Over one-third (3) do not know how much they are contributing. Interestingly, members who are already eligible for an unreduced pension (3) are almost as likely to say they don t know how much they contribute to their pension plan as newer members (3). However, newer members are less likely to have chosen the correct percentage range (16% vs. 2) than their older counterparts. Overall 10% 17% 2 3 < 0-4.9 years credit 12% 1 16% 3 to 6. 5-9.9 years credit 1 2 6% 38% 10-14.9 years credit 2% 1 3 28% 15-21.9 years credit 8% 18% 3 6% 28% Within 10 yrs of unreduced pension 8% 2 26% 7% 30% Within 5 yrs of unreduced pension 10% 20% 2 32% 7% to 8. to 11. 12% to 14. 1 + Eligible for unreduced 2%7% 17% 2 6% 3 Don t know 0% 20% 40% 60% 80% 100% Q8. To the best of your knowledge, approximately what percentage of your before-tax salary do you currently contribute to your pension plan? 33
Men more likely then women to know their contribution amounts Men (32%) are more likely than women (2) to be aware of current contribution levels. An additional 40% of women say they do not know how much they contribute, while occasional workers (4) are most likely to provide this response. Member segment < 5-6. 7-8. 9-11. 12-14. 1+ DK OVERALL 10% 17% 2 3 Gender Female Male 1 1 2 2 32% 40% 2 Full-time 18% 2 3 Employment type Part-time 10% 17% 2 3 Occasional 12% 12% 1 1 4 Employer type District school board English District school board French 10% 1 17% 1 2 1 6% 3 32% Place of work Elementary Secondary 10% 16% 20% 20% 32% 3 26% More likely Less likely 34
More than three-quarters of members understand that pension plan contributions are scheduled to increase over the next two years Three-quarters (77%) of pension plan members understand that contributions are scheduled to increase over the next two years. Only believe that contributions are scheduled to decrease, and another 1 believe they will stay the same. One-in-ten () do not know. Newer members (6) are least likely to know that contributions are scheduled to increase. Members already eligible for unreduced pension are most likely to know that contributions are increasing (8). Stay the same 1 Down Don t know Up 77% Career groupings Newer members (0 4.9) Newer members (5 9.9) Mid-career members (10 14.9) Mid-career members (15 21.9) (within 10 yrs unreduced pension) (within 5 yrs unreduced pension) (eligible for unreduced pension) Up 6 77% 80% 82% 8 77% 8 Down 2% < < 2% Same 16% 1 1 1 10% 1 Q9. To the best of your knowledge, is the amount you currently contribute to your pension plan scheduled to go up, down, or stay the same in the next two years? 35
Majority of every member segment believes contributions scheduled to increase Occasional and part-time workers are less likely than average to believe that contributions are scheduled to increase (5 and 72%) over the next two years and occasional workers are also more likely to say they don t know (2). Member segment Up Down Same DK OVERALL 77% 1 Gender Female Male 76% 78% 1 1 8% Full-time 7 12% 7% Employment type Part-time 72% 1 1 Occasional 5 1 2 Employer type District school board English District school board French 77% 7 2% 1 2 Place of work Elementary Secondary 76% 78% 1 1 10% 7% Urban/Rural Urban Rural 76% 7 2% 1 1 10% 6% More likely Less likely 36
Scheduled contribution increases are in line with expectations of the majority of members who are expecting an increase Among the 77% of members who expect an increase, almost two-thirds (6) say the amount of future increases is what they expected. A further 27% feel that the future increases are higher than expected and only expected smaller increases in the next two years. In most cases about two-thirds of members in each career grouping feel that the future increases are as they expected. Same 6 Don t know 6% Higher 27% Lower Career groupings Newer members (0 4.9) Newer members (5 9.9) Mid-career members (10 14.9) Mid-career members (15 21.9) (within 10 yrs unreduced pension) (within 5 yrs unreduced pension) (eligible for unreduced pension) Higher 26% 2 2 2 2 27% 26% Lower Same 6 5 66% 70% 67% 62% 67% DK 8% 8% 7% Q10. Currently, members contribute an average of ten percent of their before-tax salary to the pension plan. This will rise to an average of ten point three percent in 2008. There is a further scheduled increase in 2009 that will bring members contributions to about eleven percent. A financial review next year may change this rate (IF EXPECTING INCREASE) Are these increases higher, lower, or about the same amount that you had expected? 37
Majority of all member segments say amount of scheduled increases is same as expected Rural residents (70%) are most likely to report that the proposed increases are as expected. Member segment Higher Lower Same OVERALL 27% 6 Gender Female Male 27% 27% 6 66% Full-time 27% 6 Employment type Part-time 22% 66% Occasional 2 2% 66% Employer type District school board English District school board French 27% 2 6% 6 6 Place of work Elementary Secondary 26% 27% 6 66% Urban/Rural Urban Rural 28% 20% 6 70% More likely Less likely 38
Of those who do not expect contributions to increase, almost half recall seeing or hearing about increases when prompted Among the 2 of members who believe that contributions are going down (), staying the same (1), or who are unsure (), almost one-half (47%) remember hearing or seeing about contribution increases, when prompted. Less than two-in-five newer members (38%) recall seeing or hearing such information, whereas, two-thirds (67%) of those approaching unreduced pension eligibility or those already eligible (67%) recall hearing or seeing about contribution increases. No 4 Don t know Yes 47% Career groupings Newer members (0 4.9) Newer members (5 9.9) Mid-career members (10 14.9) Mid-career members (15 21.9) (within 10 yrs unreduced pension) (within 5 yrs unreduced pension) (eligible for unreduced pension) Yes 38% 38% 5 57% 58% 67% 67% Q11. Currently, members contribute an average of ten percent of their before-tax salary to the pension plan. This will rise to an average of ten point three percent in 2008. There is a further scheduled increase in 2009 that will bring members contributions to about eleven percent. A financial review next year may change this rate (IF EXPECTING DECREASE/STAY THE SAME/DON T KNOW/REFUSED) Do you recall seeing or hearing anything about these increases? 39
French school board members and men are more likely to recall seeing or hearing about increases Of those who do not expect contributions to increase, French school board members (58%), men (52%), and rural members (52%) are all more likely to recall hearing or seeing information about contribution increases, when prompted. Occasional workers (3) are less likely. Member segment Yes OVERALL Gender Employment type Employer type Place of work Urban/Rural Female Male Full-time Part-time Occasional District school board English District school board French Elementary Secondary Urban Rural More likely 47% 4 52% 50% 4 3 47% 58% 4 5 46% 52% Less likely 40