The Financial Planning Standards Council says Ottawa’s proposed Pooled Retirement Pension Plan (PRPP) legislation falls short in its design to maximize uptake and participation rate of Canadian workers.
In its submission to the federal government, FPSC expresses encouragement in seeing the government seek new ways to help Canadians save for their retirement. However, FPSC also highlights issues that may prevent the program from enacting meaningful change in empowering Canadians to save for retirement.
FPSC recommends the government amend its legislation to address the financial behavioural challenges associated with retirement income savings plans, recognizing that the promise of lower costs will not be enough to establish higher participation rates in voluntary savings vehicles.
To avoid underutilization, employees should be automatically enrolled in employer-sponsored PRPPs; opting out should be discouraged. Incentives for employers to match employee contributions should be encouraged.
In addition, FPSC says financial advice should be available to employees participating in a PRPP and mandatory for employers and plan administrators to offer. This would ensure high participation rates in the proposed program, helping many Canadians achieve their retirement security.
“Unrelated to costs and fees, behavioural issues pose the greater obstacle for individuals to participate in voluntary savings programs. For the PRPP to be an effective tool, Canadians’ attitudes and behaviours related to saving and planning need to be addressed in the proposed legislation,” says Cary List, FPSC president and CEO.