- Critics would prefer a CPP expansion instead
The federal government unveiled details of a plan to offer pooled registered pension plans on Thursday, voluntary savings vehicles aimed at Canadians who don't have access to conventional programs through their jobs.
Minister of State for Finance Ted Menzies and Industry Minister Christian Paradis unveiled details of the proposal at a news conferences in Toronto and Montreal.
"Canadians work hard to realize their retirement dreams, and PRPPs will offer them a new, low-cost and accessible pension option to help meet their goals," Menzies said.
The government tabled legislation in Parliament that could see PRPPs come into existence by the end of next year.
'Buying in bulk means lower prices.'—Ted Menzies, minister of state for finance
Pitched at people who work at and own small businesses, or the self-employed, it's believed PRPPs will essentially pool resources of employees and be managed by large financial institutions.
"By pooling resources," Menzies said. "Canadians will be able to buy in bulk.
"Buying in bulk means lower prices."
Returns will be entirely based on investment returns that will be generated from the market — there are no top-ups from government or employers, nor are there any guarantees of any payout. In that way they will be "defined contribution" plans, not defined benefit.
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In practice, they will function largely like an RRSP. People who opt to open a PRPP will have access to the type of professional financial management that they otherwise wouldn't have access to.
As it stands, roughly 60 per cent of Canadians do not have access to a work-based retirement plan.
Finance Minister Jim Flaherty reached a loose consensus for the vehicles with his provincial counterparts last year. And the Harper government is heralding the PRPP as the most significant change to Canadians' retirement planning options since the advent of the TFSA in 2009.
But critics counter that PRPPs are not materially different from RRSPs, a savings vehicle that only a third of Canadians contribute to in any given year. The average Canadian has more than $18,000 in unused RRSP contribution room at the moment.
"This pool registered pension scheme is a great deal for banks and the finance industry, but does little to address the very real needs of Canadians not able to save for retirement," CUPE national president Paul Moist said.
CUPE says more would be achieved by simply expanding the funding for the Canada Pension Plan.
"Polls have shown that 74 per cent of Canadians don’t make contributions to RRSP and other private pension vehicles because they can’t afford it. This new PRPP legislation does nothing to address this simple fact," Moist said.
"All Canadians should have a right to a secure, decent income in retirement. Expanding CPP is the best way to achieve that for most Canadians."