As expected, Prime Minister Stephen Harper’s government has just rolled out what the Conservatives are hailing as a “major milestone” to ensure retirement security for the nearly two-thirds of Canadians who do not have a company pension plan. It’s hard to see how they can make that claim with a straight face.
Pooled Registered Pension Plans (PRPPs), expected to come into force next year, will help some self-employed individuals and workers at smaller companies gain access to a private pension plan. But when Ottawa unveils the fine print it is expected that businesses will be required to offer a plan, but not to contribute to it. For workers, then, this may amount to little more than a larger professionally managed savings vehicle similar to a Registered Retirement Savings Plan (RRSP).
The need is undeniable. Many Canadians are not saving enough for retirement. Fewer and fewer have company-sponsored pensions and they do not use all their RRSP or tax-free savings options. Some simply don’t have the money to set aside. Others have underestimated their retirement needs and are not prudently planning for life after work. Unfortunately, another voluntary savings program won’t necessarily change any of that.
The pooled pension is unlikely to come close to filling the gaps in Canada’s retirement income system.