While endorsing the federal government’s proposed pooled registered pension plans (PRPPs), Towers Watson said anticipated lower administrative costs will be difficult to achieve without a consistent national regulatory framework for such programs. This will require more co-ordination from the provinces so the federal and provincial governments should work together to modernize Canada’s pension and tax laws to encourage broader participation in affordable and flexible retirement savings programs.
“We believe that the proposed PRPPs have greater potential to be both flexible and affordable than contemplated changes to the Canada Pension Plan. However, as registered pension arrangements will remain an important tool for attracting and retaining a skilled workforce for employers in many sectors, it is essential that PRPPs not undermine these plans,” said Martine Ferland, Canadian retirement practice leader at Towers Watson.
In the paper Rethinking Retirement - Principles to Guide Reform of the Canadian Retirement Income System, Towers Watson provides four guiding principles it says are fundamental to achieve a sustainable and successful retirement income system in Canada:
• Reform should target those in need of increased retirement savings.
• The costs of reform should be sustainable, and affordable to taxpayers, employers and governments.
• Reform should limit concentration of investment and other risks.
• Reform should maintain an appropriate balance between individual and government responsibility for individual savings, and ensure an appropriate level of individual choice.
“PRPPs can certainly be designed to accommodate all four of these principles, as long as employees are allowed to opt out, employer contributions are not mandated, fees are reasonable, investment concentration is limited and there is well-written communications”, said Ian Markham, Towers Watson’s Canadian retirement innovation leader.
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