The federal government’s legislation to establish pooled registered pension plans was welcomed Thursday by groups representing Canada’s banking industry, self-employed professionals and business owners but criticized by labour leaders.
Minister of State for Finance Ted Menzies officially announced the PRPPs in Toronto, saying they will give small firms and their workers the opportunity to access a large privately administered pension plan for the first time.
The PRPPs, however, are voluntary and will allow workers to opt out, and do not require firms to contribute.
“Today marks a major milestone in our efforts to ensure the ongoing strength of Canada’s retirement income system . . .” said Menzies.
“Incredibly, just over 60 per cent of Canadians do not have a workplace pension plan. 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.”
Critics, including some provincial governments, have argued that the new plan is inadequate to meet the need for greater retirement security and have asked the Canadian government to expand the Canada Pension Plan.
But the Canadian Federation of Independent Business, a 108,000-member lobby group for small- to mid-sized companies, praised the Harper government for making the PRPPs voluntary and called on provinces to follow Ottawa’s lead.
“CFIB is particularly pleased that firms will be given a choice as to whether to register for or contribute to a PRPP,” said Dan Kelly, the federation’s senior vice-president for legislative affairs.
He argued that it would be a bad idea to raise premiums for the Canada Pension Plan, a mandatory program administered by the federal government and funded by contributions from employers and employees.
Raising the premium above the current level would cost jobs and force down wages in the long-run but PRPPs have the potential to expand the options for thousands of Canadian small businesses and their employees, he said.
The Canadian Bankers Association, whose members already manage hundreds of billions of dollars of investment assets for Canadians and businesses, said it’s committed to working with the government on the PRPP initiative.
“PRPPs will make it possible for small and medium-sized businesses to offer to their employees registered pension plans that will be simple to administer. As well, PRPPs will allow self-employed individuals to participate in private sector pension plans for the first time,” said CBA president Terry Campbell.
Campbell also said the bankers association encourages provincial and territorial governments to introduce similar legislation as soon as possible.
The Ontario Medical Association, which represents the province’s mostly self-employed doctors, also issued a statement in support of the pooled pensions.
However, two of Canada’s largest organizations for unionized workers, were critical of the federal government’s approach.
“It’s really nothing more than a piecemeal approach that rewards banks, insurance companies and mutual fund companies instead of offering real retirement security options for everyone,” said Ken Georgetti, president of the Canadian Labour Congress.
“Every credible piece of information that we have seen indicates that PRPPs would be far inferior to an expanded Canada Pension Plan in providing retirement security for Canadians. This is an ideological move that flies in the face of common sense and good research.”
The Canadian Union of Public Employees – the country’s largest labour union – voiced similar concerns.
“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,” said CUPE national president Paul Moist.
“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.”
Moist also called on provincial and territorial finance ministers to pressure the federal government to move ahead with CPP reforms when they meet with Finance Minister Jim Flaherty next month.
“I know many premiers share our concerns, that CPP expansion is a far more efficient and substantive response to the retirement income insecurity issues looming over millions of Canadians,” Moist said in a statement.