Government of Canada unveils PRPP

November 24, 2011
This article was published more than 2 years ago.
Est. Reading Time: 3 minutes

Sonya Khanna

Business Editor

The Government of Canada introduced new changes to Canada’s pension landscape on Thursday, November 17 that unveiled the proposed implementation of the Pooled Registered Pension Plan (PRPP) framework.


According to Minister of State Finance Ted Menzies, over 60 per cent of Canadians do not have a workplace pension plan. Self-employed individuals and those working in small businesses with less than 100 employees will particularly benefit from the implementation of the federal portion of the Pooled Registered Pension Plan framework as it aims to ease savings for retirement to those companies that quite often lack the resources to administer a private sector plan.

“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 Minister Menzies. “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.”

“We are thrilled at the opportunity to provide our staff with an option for retirement savings,” said Thomas Lambert, Chief Executive Officer of Canadian Multicultural Radio. “The PRPP is just the kind of option we’ve been searching for. With the savings on the administrative costs we can incentivize our staff towards better retirement savings.”

Extensive research and thorough consultations by Canada’s finance ministers have conjured up the optimal method of ensuring the extensive strength of Canada’s retirement income system. To solidify plans for the framework, provincial enabling legislation must be introduced.

The benefits of investing in a PRPP include diminished investment management costs attributed with the broad scale of these funds.

“Essentially, you will be buying in bulk. This will leave you with more cash in your pocket when you retire,” said Minister Menzies.

“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 Minister of Industry, Christian cialis 20 mg 10 pills Paradis. “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.”

Employer-sponsored pension plans have tumbled to 34 per cent in 2007 from 41 per cent of working Canadians in 1991.

Although employee contributions for the PRPP are fully tax deductible, proponents against the plan say employees may find it difficult to liquidate their plans before they retire as money will likely be locked in.

President of the Canadian Labour Congress, Ken Georgetti, believes that promoting the Pooled Registered Pension Plan is a disastrous solution to the pensions crisis in Canada.

“It's really nothing more than a piecemeal approach that rewards banks, insurance companies and mutual fund companies instead of offering real retirement security options for everyone," says Georgetti. "Every credible piece of information that we have seen indicates that PRPPs would be far inferior to an expanded Canada Pension Plan in providing retirement security for Canadians. This is an ideological move that flies in the face of common sense and good research.”

The Canadian Labour Congress criticizes the PRPPs inability to provide a secure, predictable benefit in retirement, until death. In contrast to the Canada Pension Plan, the proposed PRPPs will lack the CPP’s survivor and disability benefits and will inadequately match the universal portability evident in the Canada Pension Plan.

“Given the haste with which the government has pursued this experiment, we will be watching to see whether the PRPP legislation provides for controls on the outrageously high management fees charged by banks and mutual fund companies on pension investments,” said CLC President, Ken Georgetti.

The Government of Canada will sanction tax rules for the Pooled Registered Pension Plan; the proposed PRPP tax rules will apply to both federally and provincially regulated PRPPs.




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