The federal government’s design for pooled registered pension plans (PRPPs) has flaws that need fixing to meet the needs of Canadians without a workplace pension plan, according to a report by the C.D. Howe Institute.
In Saving Pooled Registered Pension Plans: It’s Up To the Provinces, authors Keith Ambachtsheer and Edward Waitzer say that in its current form, the design blueprint will fall short of its primary objective: To ensure that the majority of Canadians who do not have a workplace pension will have access to a well-regulated, low-cost, private-sector capital accumulation plan.
“PRPPs are an excellent way to shore the private component of Canada’s pension system but they have to be designed right to fulfill their purpose,” said Ambachtsheer. “While the federal proposal is a good first step, improvements are needed.”
The authors argue that provincial leadership is required to breathe life into the federal legislation, by requiring employers to offer PRPPs to employees, and provide well thought out default options and an independent PRPP licensing system.
According to the report, the design for PRPPs does not address three key policy challenges posed by Canada’s pension coverage problem:
•While the goal is maximizing PRPP participation, voluntary employer PRPP participation, as envisioned in the bill, will result in minimal actual PRPP uptake.
•A well-designed default option design for participants is crucial, yet the proposed bill is virtually silent on this question.
•Fiduciary oversight is also essential, but the bill leaves oversight to current regulatory processes.
“Now it’s up to the provinces to inform the regulations with appropriate features,” said Waitzer.
In the authors’ view, those features should include:
•requiring employers to enroll their employees in a PRPP, as is the case with the Canada pension plan (CPP) /Quebec pension plan (QPP)
•defining minimum requirements for default options
•creating an independent, expert PRPP licensing body to ensure administrators are offering participants “value for money.”