Canada, it is said, is facing a retirement income crisis. That’s not entirely true. The top 20% of income earners can take care of themselves, whether through private savings or defined benefit pension plans. The threshold for membership in the top 20% is surprisingly low: around $64,000 in income for singles, double for families.

And the poor are well-served too, with OAS/GIS and CPP providing more support for the bottom 20% of income earners than just about any other country.

But 60% – the middle class – are going to have a difficult time if they expect to replace 70% of their work income in retirement. These are folks employed in the private sector and without defined benefit plans. These are also the folks who don’t max out their RRSP contribution room.

Hence the clamour from seniors’ lobby groups for an expanded CPP, which Ontario has heeded with a plan for a supplemental CPP.

There is an alternative: Pooled Retirement Pension Plans (PRPPs) as a workplace savings plan. Many, however, consider them a giveaway to high-cost mutual funds offered by banks, life insurers and investment fund companies.

That need not be the case. Banks and life insurers have the capacity to administer workplace savings plans cost-effectively. It’s really a question of the product mix.

The U.S. equivalent of PRPPs and RRSPs are 401(k) accounts, often administered by big investment fund complexes, such as Fidelity and Vanguard, and discount brokerages such as Schwab and TD Ameritrade.

Both Schwab and TD Ameritrade have now moved ETFs onto their 401(k) platforms, reducing the client cost from roughly 85 basis points for actively managed funds to 10 basis points for ETFs, according to

Of course, this doesn’t replace the security of CPP; but CPP only aims at 400 basis points plus inflation. And besides, CPP is not fully funded. It is not quite the panacea some may think.

Scot Blythe is a Toronto-based financial writer.
Originally published on