Winnipeg-based Great-West Life Assurance Co. Wednesday commended the Quebec government for its proposed voluntary retirement savings plan, the province’s version of the federal pooled registered pension plan initiative.
“The VRSP offers a strategic framework for other Canadian provinces as they develop their own PRPP legislation,” says Bill Kyle, executive vice president, wealth management at Great-West Life. “We encourage all provincial governments in their efforts to help Canadians achieve retirement income adequacy by incorporating universal access, auto enrolment, auto escalation and locking in of contributions.”
“The Quebec government’s commitment to provide universal pension access to Quebec workers is critically important to the VRSP’s success in Quebec,” Kyle says. “This same commitment to universal access will be key to making the PRPP a success in other provinces across Canada.”
VRSPs are expected to benefit Quebec workers by providing a plan structure to pool smaller employers’ assets to allow these plans to benefit from economies of scale.
According to the proposal, which must still be passed into law, VRSPs must be made available to all employees of businesses with five or more eligible employees.
Automatic enrolment engages members early to be actively involved with their retirement planning and helps them take advantage of tax-free compounding.
By including a lifecycle (e.g., target date) fund as the default, the member’s asset mix in the VRSP will adjust to their stages of life automatically, providing an easy way to diversify and rebalance as they get older.
Although the current proposed VRSP structure allows plan members to reserve savings for retirement and access the contributions they make at any time, the VRSP structure locks in employer contributions until the age of 55 to help ensure employees’ savings are earmarked for retirement.
In addition, the VRSP is proposed to be portable. Employees who change jobs can continue contributing to the same VRSP.