December 20, 2010 – Two recent developments could make significant headway toward the expansion of pension coverage in Canada to persons who do not have access to employer pension plans. First, on December 7, 2010 the federal government released draft Income Tax Act (ITA) amendments that will accommodate increased tax deductible contributions to the Saskatchewan Pension Plan (SPP). Second, on December 15, 2010 the federal Minister of Finance tabled a draft paper for discussion at the December meeting of the Ministers of Finance and Treasurers entitled “Framework for Pooled Registered Pension Plans” (PRPP)…………
A need for Speed?
That the provincial and federal governments want to do something to expand pension coverage and prompt Canadians to save more is clear. Minister Flaherty’s cover letter to the Ministers accompanying the PRPP paper calls for dialogue with stakeholders and a high level of regulatory harmonization, all the while moving “quickly” and “expeditiously”.
A call for speed will not solve the problems of harmonization of pension standards – something that has proven unachievable to date. The RPP remains a voluntary measure, as does the PRPP. The former is a pension plan, with the complexity that this entails; the latter is an RRSP in disguise, a potential Trojan horse for harmonization. Speed should not trump a consideration of the issues, however complex they may be.
However, if the governments take too long to take action on the PRPP, and if the SPP is changed as proposed, Canadians might be attracted by the prospect of having their retirement savings professionally managed at a low cost in the SPP without having to make investment choice.