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(Oct. 30, 2014) Pension and retirement experts usually agree that for a retirement system to be effective, participation should be mandatory, as should employer/employee contributions.
The problem with Pooled Registered Pension Plans (PRPPs), say critics, is that they aren’t mandatory and don’t require employer contributions. As such, critics say, they are little more than a glorified group RRSP – not particularly effective as a generator of adequate retirement income.
That line of thinking crosses political lines, with both unions and think tanks like the C.D. Howe Institute panning PRPPs, introduced by the federal government in 2012 as an alternative to an expanded Canada Pension Plan, and most recently proposed by Nova Scotia, writes Claire McIlveen in the Halifax Herald.
PRPPs look like a good idea, at first glance, writes McIlveen – until, that is, the downside is considered. The federal plan is the “top pension choice for the Canadian Federation of Independent Business,” writes McIlveen, as “employers don’t actually have to contribute to employees’ retirement savings.”
“For employees, that’s bad news, and falls far short of a defined benefit plan, in which the plan sponsor, or company, is responsible for any shortfall. Employers also contribute to defined contribution plans, which shift investment risk to plan members,” he explains.
More than 60 per cent of Canadians lack an occupational plan of any type, and only 15 per cent of private sector workers have a defined benefit plan. PRPPs are hardly likely to pick up the slack, writes McIlveen.
“Without employer contributions, PRPP payouts might not be enough to keep the cats, much less a retiree, in food.”
Unions told a Nova Scotia legislative committee they don’t like PRPPs and want to see the CPP expanded instead. In that, they have common ground with the C.D. Institute which in 2012 released a report calling PRPPs nothing more than an RRSP program “with a new coat of paint,” writes McIlveen.
The report’s author, pension expert James Pierlot (click here for an ARIA interview with him) wrote that PRPPs “should be avoided entirely by many low- to middle-income workers, who will face taxes and government benefit clawbacks on PRPP retirement benefits at rates that are significantly higher than the refundable rates that apply to contributions.”
For more on this, click here.

ARIA provides a forum for an informed discussion on retirement income adequacy, and other related issues, including pension and retirement coverage, and defined benefit pension plans – ARIA pensions blog, 12 Dunlop Street, Barrie, ON, L4N 1V6 – ariapensions@gmail.com

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