The Investment Funds Institute of Canada has laid out four recommendations for improving and “future-proofing” Canada’s retirement income system, in response to a consultation paper on pension reform by the government of British Columbia.

In a letter to B.C. Finance Minister Colin Hansen on Thursday, IFIC called for improvements to the third pillar of the retirement income system — employer-sponsored/individual retirement savings plans and other savings options.

“Now is the time to improve parts of the third Pillar to ensure parity in the ability of all Canadians to save for retirement,” said Joanne De Laurentiis, IFIC’s president and CEO.

To help “future-proof” Canada’s retirement income system and to allow Canadians to save for their retirement in an equivalent manner, whether they have an employer pension plan or not, IFIC makes four recommendations:

1) Make it easier and more appealing for employers – and particularly small-and medium-sized businesses – to establish retirement plans affordably and without liability;

2) Increase the number of Canadians that participate and save enough in employer or individual retirement savings plans through the introduction of automatic enrollment and contribution escalation features and financial education;

3) Ensure that those with RRSPs enjoy the same tax benefits as those with standard defined benefit and defined contribution plans, by increasing RRSP limits from 18% to 34% of earned income to achieve the average benefit value of the federal government employee plan benchmark;

4) Understand the value of Canadians’ access to financial advice when comparing all-in costs and benefits of features available within government-provided, employer-sponsored and individual retirement plans and other savings.

In explaining the fourth recommendation, IFIC said that advice is often undervalued or underplayed in some of the analysis that is done comparing private and public-sector retirement savings options.

“The value of advice must be recognized,” IFIC said.

The B.C. government released its pension consultation paper in early February, seeking public views on how to best address anticipated future shortfalls in Canada’s retirement income system. Results of the consultation will be used to develop recommendations to be presented to the provincial premiers at the next Council of the Federation meeting in August.

“Our specific proposals are targeted, cost-effective ways to remove complexity, uncertainty and regulatory costs faced by plan sponsors and plan participants, leaving more savings in the hands of Canadians,” De Laurentiis said. “The improvements these initiatives will bring will strengthen our retirement system for the future.”

IE