Like many other industry groups, the Portfolio Management Association of Canada is speaking out on the Ontario retirement pension plan (ORPP) and calling on the Ontario government to change course on its initiative to implement a mandatory province-wide pension plan.
PMAC’s position is there are many flaws in the current design of the ORPP and believe there needs to be more cost-benefit analysis regarding the plan, says Katie Walmsley, president of PMAC in Toronto.
PMAC would prefer that Ontario join provinces like British Columbia and Alberta in following through on legislation that will introduce pooled registered pension plans (PRPP). These will be low-cost and simpler to administer than the mandatory ORPP, according to PMAC’s submission to the province’s consultation process for the ORPP.
One of the biggest issues with the province’s proposed ORPP is what it defines as a “comparable” pension plan that would allow employers to offer their own plan. The government has indicated that workplaces with defined benefit pension (DB) plans will not be required to provide the ORPP. However, this means that employers who provide defined contribution (DC) plans and group registered retirement savings plans would have to implement the ORPP.
Employers in Ontario are going to have to decide whether they continue with their DC plans, scale back their contributions or abandon them altogether, according to Walmsley. And employers are not the only ones who may not like the switch.
“One of the biggest selling points for employees in terms of a DC plan is that it’s portable. If they move to another employer, it’s the [employee’s] investments [and] they can transfer it,” says Walmsley. “With a DB plan, they have to make a decision whether to leave it or cash out.”
With some other provinces introducing PRPPs, the lack of standardization regarding pension plans across provinces may also be a problem.
“For multi-province employers, it’s even more complicated because they’ve got an objective of equalizing benefits across Canada,’ says Walmsley.
She also calls the ORPP a “step back” considering the province’s current emphasis on provincial literacy programs.
“I think it’s just going against a direction that has been moving very nicely in terms of encouraging investors to understand what their personal objectives are,” she explains, “understand what their financial needs are in retirement and looking at what they can contribute to that on a personal basis versus what the government programs are going to give them.”