The Canadian Life and Health Insurance Association Inc. is calling on the federal government to adopt provisions to encourage the use of proposed new retirement savings vehicles, pooled registered pension plans (PRPPs).
Speaking to the House Standing Committee on Finance on Thursday, CLHIA President Frank Swedlove, applauded the plan to introduce PRPPs. “To be successful and to maintain low costs, it will be important to get the structure right. PRPPs will need to be simple. They will need to be consistent across the country. And they will need to promote participation and growth of retirement savings,” he said.
To that end, Swedlove recommended that the structure involve auto-enrolment. “When an employer offers a plan, employees would be told about it and, unless they choose to opt out, would be enrolled 60 days later, and payroll deductions would begin,” he explained.
Second, he called for a provision to require all employers to “at least offer some form of workplace retirement plan. This would not require employer contributions, recognizing that might present a hardship for some employers, but would simply require that they facilitate a plan in the workplace.”
Swedlove said that it estimates that, without these provisions, 175,000 Canadian workers would be enrolled in a PRPP. With auto-enrolment only, that number would rise to 745,000. With auto-enrolment and a requirement that employers offer a plan, almost three million additional Canadians would be enrolled and saving for retirement.
CLHIA also recommends changes to the Income Tax Act to: remove the requirement for an employment relationship between pension plan members and the plan sponsor, which would allow for pooled plans where there isn’t a common employer and allow for plans administered by a financial institution; and, that it use a hybrid administrative regime for PRPPs that provides pension protections for spouses and common-law partners on death or marital breakdown and is locked-in to provide retirement income, but also uses the Income Tax Act’s simpler RRSP contribution rules to reduce the administrative burden.
Finally, Swedlove said that if Finance doesn’t introduce legislation to implement PRPPs by the end of the year, as it hopes to do, that the legislation be introduced in the next federal budget.