The federal government this morning introduced the much-anticipated Pooled Registered Pension Plans (PRPP) Act to address concerns over declining pension coverage for Canadians.
The act incorporates changes to Canada’s pension landscape that will make saving for retirement easier for millions of Canadians, the government says.
“Today marks a major milestone in our efforts to ensure the ongoing strength of Canada’s retirement income system by providing a pension option for the many workers, who currently do not participate in a company pension plan,” said Ted Menzies, Minister of State (Finance). “Incredibly, just over 60% of Canadians do not have a workplace pension plan. Canadians work hard to realize their retirement dreams, and PRPPs will offer them a new, low-cost and accessible pension option to help meet their goals.”
PRPPs are the outcome of several years of co-operation, research and consultations by federal and provincial finance ministers on the best ways to ensure the long-term strength of Canada’s retirement income system.
“If you invest in a PRPP you will benefit from lower investment management costs associated with the large scale of these funds,” Menzies said. “Essentially, you will be buying in bulk. This will leave you with more cash in your pocket when you retire.”
Provincial enabling legislation will need to be introduced for the framework to become fully operational.
“Canadians want their governments to act on their priorities and deliver results on a timely basis, and the PRPP is a prime example of what we can accomplish for Canadians when governments work together,” said Christian Paradis, Minister of Industry. “The Government of Canada is therefore confident that the provincial side of the framework will soon be in place to help Canadians reach their retirement objectives.”
In addition, the tax rules for both federally and provincially regulated PRPPs, are being developed by the federal government.
PRPPs are a new type of broad-based privately administered pension arrangement. The plan addresses gaps in the existing retirement income system by providing a new, accessible, large-scale and low-cost defined contribution pension option to employers, employees and the self-employed.
This provides an attractive option to small business owners and their employees, who will not only have access to a low-cost pension plan with lower administrative costs, but will also have professional administrators working to ensure that funds are invested in the best interests of plan members.
These features will remove barriers that have kept many employers from offering pension plans to their employees and that, therefore, prevented employees from participating in large-scale pension plans.