Government introduces Pooled Registered Pension Plans Act

Still requires provincial legislation, changes to tax rules
||Last Updated: 11/23/2011

The federal government has tabled legislation to establish pooled registered pension plans (PRPPs) in Canada.

“Today marks a major milestone in our efforts to ensure the ongoing strength of Canada’s retirement income system by providing a pension option for the many workers... who currently do not participate in a company pension plan,” said Ted Menzies, minister of state for finance.

“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.”

In December 2010, federal, provincial and territorial finance ministers agreed to move forward to introduce a new type of broad-based privately administered pension arrangement to help bridge gaps in the retirement system. PRPPs are meant to provide a new, accessible, large-scale and low-cost defined contribution (DC) pension option to employers, employees and the self-employed, according to the government. They will allow individuals who currently may not participate in an employer-sponsored pension plan, such as the self-employed, to make use of this new option.

Since these plans will involve large pooled funds, plan members will benefit from the lower investment management costs associated with the scale of these funds.

“If you invest in a PRPP you will benefit from lower investment management costs associated with the large scale of these funds,” said Menzies. “Essentially, you will be buying in bulk. This will leave you with more cash in your pocket when you retire.”

The design of these plans will also be straightforward, said the government. They are intended to be largely harmonized from province to province, which will also facilitate lower administrative costs.

Provincial enabling legislation will need to be introduced for the framework to become fully operational.

In addition, the tax rules for PRPPs are being developed by the government and will be released in draft for comment shortly. The PRPP tax rules will apply to both federally and provincially regulated PRPPs, said the government.

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