TORONTO--(BUSINESS WIRE)--The debate on national pension reform has changed gears with the Federal Government’s proposal to introduce Pooled Registered Pension Plans (PRPPs). Without sufficient support from the provinces to expand the Canada Pension Plan (CPP), the federal government is proposing a private sector solution at this stage, postponing any CPP expansion until the necessary provincial support is secured.
As Canadians and the federal and provincial governments assess the options for improving the pension system, Towers Watson encourages a closer look at how the proposed changes will affect working Canadians and their employers. The professional services company has put forth the following four guiding principles as fundamental to achieving a sustainable and successful retirement income system:
1. Reform should target those in need of increased retirement savings
2. The costs of reform should be sustainable, and affordable to taxpayers, employers and governments
3. Reform should limit concentration of investment and other risks
4. Reform should maintain an appropriate balance between individual and government responsibility for individual savings, and ensure an appropriate level of individual choice
In the long run, the changes that will provide the greatest benefit to all Canadians are those that target those who need it most, which research indicates are middle income earners. “We believe that the proposed PRPPs have greater potential to be both flexible and affordable than contemplated changes to the CPP. 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,” stated Martine Ferland, Canadian Retirement Practice Leader at Towers Watson.
“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”, added Ian Markham, Towers Watson’s Canadian Retirement Innovation Leader.
One of the selling points for PRPPs is the expectation of lower administrative costs than many pension plans offered by employers. However, this will be difficult to achieve without a consistent national regulatory framework for such programs, which will require more coordination from the provinces than has been seen to date. Towers Watson encourages the federal and provincial governments to work together to modernize Canada’s pension and tax laws so as to encourage broader participation in affordable and flexible retirement savings programs.
A closer look at the proposals for PRPPs and reforming the Canada and Quebec Pension Plans is provided in the article: Rethinking Retirement - Principles to Guide Reform of the Canadian Retirement Income System, which is available at www.towerswatson.com.
About Towers Watson
Towers Watson (NYSE, NASDAQ: TW) is a leading global professional services company that helps organizations improve performance through effective people, risk and financial management. The company offers solutions in the areas of employee benefits, talent management, rewards, and risk and capital management. Towers Watson has 14,000 associates around the world and is located on the web at towerswatson.com.