Pooled Registered Pension Plans: Consultations Begin

Minister of State (Finance) Ted Menzies launched a summer tour in Toronto on July 18th to discuss Pooled Registered Pension Plans with stakeholders and the public.  He will be meeting with provincial and territorial finance ministers to prepare to discuss PRPPs at the next Finance Ministers' meeting scheduled for December, 2011. So far, media availability has been scheduled at small business locations in Fredericton on July 19th and in Halifax on July 20^th.

"PRPPs will play a critical role in improving the range of retirement savings options available to Canadians by providing a low-cost retirement savings opportunity for employees as well as the self-employed,î said Minister Menzies. "This is especially important for small business and its employees who will now have access to a private pension plan for the very first time.î

It is well known that many Canadians are not able to save enough for retirement. Pooled Registered Pension Plans are being developed to allow employers to offer a low cost, flexible savings vehicle that may encourage regular retirement contributions. Self-employed individuals will be able to take part too. This initiative is especially targeted at the 20-40 demographic, who still have many years in which to build a retirement nest egg. The consultation process will fill in the framework for PRPPs that was announced by the federal government last December.

There are many financial experts who would rather see the Canada Pension Plan expanded than a new savings plan put into place. The federal government has not ruled out further changes to the CPP. However, it is hoped that once the details of Pooled Registered Pension Plans are established they will be seen to be a welcome addition to the retirement vehicles currently available, offering the benefits of pension plans to a wider group of working Canadians.

According to the Framework for Pooled Registered Pension Plans announced in December, 2010, "A PRPP will be subject to most of the existing rules applying to defined contribution RPPs (referred to as money purchase RPPs in the tax rules), but with some exceptions as well as new requirements to deal with its broad-based nature.î The benefits of pension splitting, access to the pension amount before the age of 65, ease of portability between employers and a low fee structure would be welcome news indeed!

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