Lining our pockets for retirement (Editor’s notes)

Pooled registered pension plans are a good first step to help workers save

Everybody wins when retirees have more money. The more purchasing power workers have as they ride into their golden years, the better off the economy will be.

The one potential loser is HR departments trying to retain valuable talent — but offer challenging work and employers will be able to keep the best on staff and coax great talent out of retirement, as article 8951 illustrates.

But let’s get back to retirement nest eggs, or the lack thereof — about 38 per cent of employees were members of a registered pension plan as of Jan. 1, 2009, the most recent data available from Statistics Canada. In the public sector, 84 per cent of workers had a pension scheme of some type, while in the private sector only about one-quarter had coverage.

Set aside, for now, the debate on whether taxpayers can afford (or are willing) to pay for public sector defined benefit (DB) plans into the future. Anyway you slice it, it’s hard to put a positive spin on the fraction of private sector workers covered by an RPP.

That’s why there has been so much hand-wringing in Ottawa — and across the country — about what to do to boost retirement income. Labour groups, and some provinces, have called on the federal government to expand the Canada Pension Plan.

It’s a simple plan: Force employers and employees to put more into it and pay out a bigger benefit. The scheme is already in place, it covers pretty much every worker and there’s not much legwork to do except for some actuarial math.

But employers aren’t chomping at the bit for more payroll taxes and, with a Conservative government at the helm, that scenario was unlikely from the start. Instead, Finance Minister Jim Flaherty unveiled the latest acronym in retirement jargon — PRPPs, short for pooled registered pension plans. Senior editor Sarah Dobson walks employers through PRPPs in article 8952. But, essentially, a PRPP is designed to give employers the ability to easily set up a defined contribution plan for workers and take advantage of the cost savings of being part of a large pool — no fuss, no muss.

Critics point out PRPPs aren’t DB plans — they don’t guarantee any income level whatsoever. And because it looks like participation won’t be mandatory, there’s concern many employers will opt out.

So it’s not a panacea. But it’s a positive step that will give employers — particularly small and medium-sized firms — more options and will undoubtedly lead to more workers saving for retirement. Let’s give Ottawa a tip of the hat for that.

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