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January 23, 2013
PRPP looks DOA

The federal government’s proposal to create a new universal pension plan appears to be dying.

While legislation introducing the new pooled registered savings plan (PRPP) was passed by the House of Commons in June 2012, to date, no province has passed similar legislation endorsing the new pension scheme.  Since the provinces have jurisdiction over their own pension regulations, they too have to pass enabling legislation before the PRPP can become a reality.  The result: it looks like the PRPP is DOA (dead on arrival.)

The PRPP is designed to allow workers employed by organizations that do not offer pension plans or group registered retirement savings plans (RRSPs) to save for retirement privately.  

Under the PRPP proposal, employers will be required to offer the new retirement savings plans to their employees, however, they would not be required to contribute to the plans or match their employees’ contributions, as is done with some group RRSPs.

In addition, the administration of PRPPs will be offered by private financial institutions such as banks, credit unions, fund companies and other financial institutions.

Since the concept was floated at the annual finance ministers’ meeting in December 2010, only Quebec has tabled legislation introducing a variation of the plan.  However, that legislation died on the order paper when that province went to the polls this past summer.  

The PRPP concept met with mixed reactions at best.  While endorsed by financial institutions, small businesses and some consumer groups, the alternative national pension plan was soundly condemned by organized labour, senior citizen groups, and advocacy groups including the CD Howe Institute, which called the scheme “RRSPs with just a new coat of paint.” (See the October 2012 edition of the Coughlin Courier.)

Leading the charge against the plan is the province of Ontario, which has consistently favoured expanding the contribution limits and pension pay-out of the Canada Pension Plan (CPP.)

Calling the PRPP concept “flawed,” Ontario advocates the expansion of CPP’s joint employer-employee contributions from the
current level of 9.9 per cent of eligible employee earnings to 12 per cent or higher.  In return, the CPP pension pay-out would increase from today’s level of
25 per cent of the yearly maximum pensionable earnings (YMPE) to approximately 35 per cent of the YMPE.  (See the December 2010 issue of the Coughlin Courier for background.)

With Ontario’s leadership now in transition, a new government in power in Quebec, and British Columbia scheduled to go to the polls in mid-2013, it is unlikely that any serious national pension reform proposal will be forthcoming in the near future.

Meanwhile, according to the Canadian Institute of Actuaries, 11 million Canadians will continue to have no access to a workplace pension.

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