The HOOPP ADVANTAGE
The reason HOOPP has been the leading pension plan provider in the Ontario healthcare community for the last 50 years is a simple one: members know that, once they start their pension, they can depend upon it for life.
It’s one of the many advantages of being a HOOPP member.
In addition to providing a lifetime retirement income based on earnings and years of contributing to the Plan, members can also take advantage of the following benefits:
- The option of retiring early
- Inflation protection
- Portability - the ability to transfer money to and from from other pension plans to increase your pension as well as the ability to take your pension with you if you take a job at a new employer that also offers HOOPP
- Survivor benefit provisions
The Advantages of the Defined Benefit Pension Plan
HOOPP is a defined benefit (DB) pension plan.
What does this mean?
This means that the pension benefit you receive from the Plan upon retirement is defined in advance. Years before you retire you can quickly and easily determine your retirement income based on the defined benefit formula which is calculated using the best five years of earnings and number of years of contributory service in the plan.
How does it work?
With HOOPP, you can estimate in advance what the pension you will receive from HOOPP will be. HOOPP pensions are based on a formula that takes into account your earnings history and service in the Plan. For each year of contributory service, your basic lifetime pension will be:
- 1.5 per cent of your average annualized earnings up to the average year's maximum pensionable earnings (YMPE) plus
- 2.0 per cent of your average annualized earnings above the average YMPE
You receive your pension – plus any inflation protection paid by HOOPP – for as long as you live.
How does the defined benefit model compare against other types of pension plans?
The chart below compares the two models:
| |
Defined Benefit |
Defined Contribution |
The DB Advantage |
| Philosophy |
To reward members for long service with a lifetime retirement income. |
To help members accumulate retirement savings during their active career. |
The security of income rather than savings. |
| Contributions |
Typically, members and employers contribute a set percentage of the member's salary. Funds are deposited in a pension fund for the benefit of all Plan members. |
Typically, members and employers contribute a set percentage of the member's salary. Funds are deposited in a personal account set up in the member's name. |
In most DB plans, employers shoulder the investment risk. Under a DC plan, members take on all the investment risk. |
| Investment Decisions |
Professional money managers make the investment decisions based on strict guidelines established for the Plan as a whole. |
Members have to decide how their money is invested, usually based on a range of available investment options. |
With a DB plan, members don't have to worry about making investment decisions or tracking investments because a highly qualified investment professional is doing it for them. |
| Income at retirement |
Retirement income is a percentage of the member's pre-retirement earnings - so the more service the member has, the bigger that percentage will be. Once members start receiving their pension, they receive it for life. |
The money in the member's account is used to buy a lifetime annuity (an income stream). The size of that income will depend on various factors such as how much the member has contributed, the success of the investment strategy, and interest rates when the member buys an annuity. |
With a DB plan, members can estimate, in advance, what their pension will be. Benefits are pre-defined - members know what they are going to receive. |
| Ancillary benefits |
Many DB plans, offer ancillary benefits such as:
- Inflation protection
- Enhanced early retirement benefits
- Survivor benefits
|
At retirement, members may be able to buy a lifetime annuity that includes some ancillary benefits such as inflation protection - but these extras tend to be expensive, which reduces the amount they'll have available to provide an income stream. |
With a DB plan, the ancillary benefits are built in and members don't have to worry about the additional cost of shopping around for an annuity that includes them. |
