The federal government’s proposed pooled registered pension plans (PRPPs), as well as any subsequent retirement income system reform undertaken in Canada, should be designed to benefit those who need the most help—namely middle-income earners—according to Towers Watson.
In a new article called Rethinking retirement: Principles to guide reform of the Canadian retirement system, the professional services company puts forth four principles it believes are fundamental to achieving a sustainable and successful retirement income system for Canadians.
- Reform should target those in need of increased retirement savings.
- The costs of reform should be sustainable and affordable to taxpayers, employers and governments.
- Reform should limit concentration of investment and other risks.
- Reform should maintain an appropriate balance between individual and government responsibility for individual savings, and ensure an appropriate level of individual choice.
“We believe that the proposed PRPPs have greater potential to be both flexible and affordable than contemplated changes to the CPP. However, as registered pension arrangements will remain an important tool for attracting and retaining a skilled workforce for employers in many sectors, it is essential that PRPPs not undermine these plans,” said Martine Ferland, Canadian retirement practice leader at Towers Watson.
One of the selling points for PRPPs is the expectation of lower administrative costs than many pension plans offered by employers. However, the article argues that this will be difficult to achieve without a consistent national regulatory framework for such programs, which will require more coordination from the provinces than has been seen to date.
“PRPPs can certainly be designed to accommodate all four of these principles, as long as employees are allowed to opt out, employer contributions are not mandated, fees are reasonable, investment concentration is limited and there is well-written communications”, added Ian Markham, Towers Watson’s Canadian retirement innovation leader.