Voluntary pensions – upsides, downsides

Call to develop VPPs growing, but should government or private sector lead?
By Norma L. Nielson
|Canadian HR Reporter|Last Updated: 10/04/2010

Several proposals have surfaced recently that call for the government to develop and offer some sort of voluntary pension plan (VPP). Any such plan would combine workers from multiple employers and set an entry level minimum contribution formula for employers and employees (while also offering higher contribution options). The plan, as proposed in most provinces, would allow employers and employees to opt out.

There are several arguments in favour of a VPP:

Economies of scale: Efficient and effective administration is a fundamental element of the implementation and ongoing success of a VPP. Administration would be most efficient if contributions were collected and submitted via existing payroll systems and it provided cost-effective access to high-quality investment management expertise. The goal would be to deliver plan administration services at a cost comparable to that currently enjoyed by the largest pension plans.