PRPPs To Address Gaps in Pension System

Consultations and deliberations continue on the proposed new Pooled Pension Retirement Plans (PRPPs) which differ from existing RPPs in that individuals who may not currently participate in a pension plan, such as the self-employed, can benefit from participating in a large-scale, low-cost pension plan. You may participate by email with your suggestions on PRPP's: prpp-consultations-rpac@fin.gc.ca

The Honourable Ted Menzies, who is presiding over the consultations, spoke recently at the Investment Funds Institute of Canada's Annual Industry Conference, explaining that this new opportunity is especially important for millions of small business owners and their employees, who will now have access to a private pension plan for the very firsttime. They will also benefit from the lower investment management costs. The high level details of the plans are as follows:

- PRPPs will be available to employers, employees, and the self-employed. There will be two classes of members: Employed Members and Individual Members. Investments will be common across all members, but there will becertain administrative and regulatory differences between the two. For some Canadians, this will be the first opportunity they have had to contribute to and benefit from a retirement plan.

- As a result of ëpooling', administration costs will be lower than regular pension plans. Indeed, the Minister stated: "PRPPs will be efficiently managed, privately administered pension arrangements that will provide greater choice to employers and individuals, thereby promoting pension coverage and retirement saving.î

- PRPP's will allow for the portability of benefits, facilitating easy transfers between plans

- PRPP's will ensure that funds are invested in the best interest of members.

- Similar systems have been recognized internationally by experts such as the Organization for Economic Co-operation and Development (OECD) as a successful model in reducing poverty among seniors and proving consistent high levels of income replacement.

- The plans are intended to be harmonized across jurisdictions as much as possible, which will also facilitate lower administrative costs. However, inevitably in a federal system, there will be some variances across jurisdictions. For example, one aspect of the plan will allow each jurisdiction to make a determination as to whether it wants to impose mandatory employer participation. For more info: http://www.fin.gc.ca/act/prpp-prac/index-eng.asp