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N.L government considers unlocking pensions for COVID-19 relief

People with locked-in pension accounts may soon be able to access their retirement income early for COVID-19 financial relief if the provincial government amends the Pensions Benefits Act.

Finance Minister Tom Osborne told CBC News that while MHAs have heard from constituents looking to unlock their pensions for years, the calls have been more frequent since the pandemic hit N.L.

"So government has looked at doing consultations, it's a very complex issue," he said.

"If you've got a rush on cashing out pensions, it could affect the liquidity of a pension plan. If you cash out your pension, the money that was supposed to be there for your golden years, you're using today. We're looking at a balance."

Osborne said the provincial government has an obligation to protect people's retirement funds but also understands those who have already retired may need some additional cash while going through a hardship.

The government is looking for input from anybody from financial advisors, planned administrators and unions to get feedback on any changes that could be made. Consultations will run until September.

"People need a quality of life in retirement. They also need a quality of life today," he said.

Premier Dwight Ball said during the government's COVID-19 briefing Wednesday the province would never make a decision that would disrupt the integrity of those plans.

"What's important here now is to start an engagement process to take a look at this and see what the impact would be," he said.

Garrett Barry/CBC
Garrett Barry/CBC

Ralph Morris, board member of the Newfoundland and Labrador Public Sector Pensioners' Association, told CBC News Wednesday's announcement might seem like a good idea to some but will put people in a "poverty pandemic" that will extend well after the COVID-19 outbreak has disappeared.

"I can see people, who today … they have diminished income, or they're laid off, or their jobs are lost or whatever the case may be, who may think this is quick access and it's the answer," he said. "Well, it's not."

Morris also worries about those with spousal benefits.

"If you take this out now, in one or the other, in many cases there's just one pension earner, then the spouse that they leave behind is going to have a diminished pension," he said.

"When those people retire on their own they're going to drop even further below the poverty line with the diminished pension they will receive."

Available in other provinces

Larry Short, CPA and senior financial advisor with Short Financial, said the provincial government's idea is good, and some other provinces allow it.

"It removes people, in some cases, from social services, from welfare, and it allows them to access the savings that they've had built up over the years," Short said.

"If you have a federal plan there is a provision for this. If you are in Ontario, or Alberta or Manitoba there's also a provision for it, but in the province of Newfoundland and Labrador it's very restricted."

However, Short said some people could find themselves in a worse financial situation later by drawing from their pension now.

Garrett Barry/CBC
Garrett Barry/CBC

"Somebody could abuse the system by taking a pension that is planned for their ultimate retirement and spend that money early," he said.

Read more from CBC Newfoundland and Labrador