A rather unimpressed advice industry notwithstanding, the newly re-introduced Pooled Retirement Pension Plans (PRPPs) have found considerable favour with small business owners, according to a recent poll from the Canadian Life and Health Insurance Association (CLHIA).
The study showed almost 70% of small and medium enterprise (SME) owners and executives without workplace plans are interested in offering the new retirement savings option to employees.
“Small and medium sized business executives are ready to embrace PRPPs as they look for new ways to keep employees and attract new people,” said Frank Swedlove, president, CLHIA. “We are on the cusp of making a fundamental shift in the pension landscape.”
Statistics Canada and industry data suggest more than 50% of private-sector workers do not have access to a workplace retirement plan. The poll showed that a large majority (71%) of all SMEs agree that employers should be required to offer some form of retirement plan to employees.
Given that PRPPs will be a low-cost alternative, there is now an opportunity for these business owners to participate, and at a low cost usually only realized by very large pension plans.
“These savvy employers know a good thing when they see it,” added Swedlove. “Universal access will assure that all Canadian workers have an opportunity to save at the workplace.”
The idea of making PRPPs a requirement found support across Canada, and while it was highest among those who already have a plan (79%), it was still very strong (66%) among those who do not have a plan.
Although it is not mandatory for employers to contribute to the PRPPs in the current legislation, 73% of SME executives interested in providing PRPPs to their employees said they will “look at ways their business could contribute to the plan over and above what the employee puts into it”.
In November 2011, the Federal Government tabled legislation introducing PRPPs, a new type of broad-based privately administered pension arrangement.
The plan addresses gaps in the existing retirement income system by providing a large-scale and low-cost defined contribution pension option to employers, employees and the self-employed.
It is being promoted as a low-cost pension option with lower administrative costs. These features are expected to remove barriers that have kept many employers from offering pension plans to their employees.