Self-employed people in New Brunswick may soon be able to better plan for retirement.
This month the New Brunswick government introduced Bill 22, legislation that would allow people who are self-employed to start a pension plan for themselves and their employees.
Pooled Registered Pension Plans, or PRPPs, offer lower setup costs and administration fees for small businesses, said Jason Debly, with the province's Financial and Consumer Services Commission.
- The PRPP: Retirement options beyond RRSPs
- Pooled registered pension plans coming to Manitoba this fall
"The traditional pension plan is administratively burdensome and costly, so they don't have a pension plan and a lot of self-employed people are entering retirement not prepared as best they could," he said.
Employer contributions are tax deductible
The federal government has talked with the provinces about passing provincial legislation to kickstart the plan across the board, Debly said.
"This act will allow for an additional instrument to New Brunswickers for pension planning that is low-cost to both employees and employers," Finance Minister Cathy Rogers in a news release.
Manitoba, Nova Scotia, Quebec, Saskatchewan and British Columbia have already passed legislation to allow self-employed people and employees of small businesses to set up a retirement plan with a bank or insurance company.
If an employer sets up a plan for their employees and contributes to the PRPP, they will receive a tax deduction, which is a way for the government to encourage employers, Debly said.
Another draw of the plan, he added, is an employer's contributions are not treated as taxable income for the employee — whereas contributions to a group RRSP are taxable income.
The plan is also portable so employees can take their contributions with them from job to job.
"The main point of the PRPP is to reach out to the self-employed and the employees of small business," Debly said.