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PRPP

The only news around pooled registered pension plans (PRPPs) today seems to be coming from the federal Department of Finance, Ted Menzies, Minister of State (Finance) in particular, who has been stewarding the PRPP initiative.

One of the boilerplate sentences appearing in virtually every Finance Canada news release on PRPPs states the following:

“There was unanimous agreement at the December 2010 meeting of federal and provincial finance ministers to pursue a framework for PRPPs as an effective and appropriate way to help bridge existing gaps in the retirement system.”

That was then, but what about now? Unanimous agreement of finance ministers is not the same as full commitment of their respective governments, nor is such agreement binding on a successor finance minister.

Of the 10 provincial governments, eight have had elections since the December 2010 meeting. Ontario may have another election in the offing with the resignation of Dalton McGuinty and British Columbia and Nova Scotia both go to the polls in 2013. Even where governments have not changed, finance ministers have. As examples, since December 2010 there have been two new finance ministers in B.C. and similar turnover in Alberta.

Industry Insight: PRPPs and a prorogued legislature

“Even had Dalton McGuinty stayed, there was no sign that Ontario was going to roll out PRPPs any time soon. In fact, there was reason to think the Ontario Liberals would continue to push for an expanded CPP instead. If anything, McGuinty’s departure may actually accelerate the introduction of PRPPs in Ontario should the new leader be more favourably disposed towards them. Even in the best-case scenario, we can’t expect PRPPs to be launched in 2013 in Ontario. -Fred Vettese, chief actuary, Morneau Shepell

“The 2012 Ontario Budget made it clear that the Ontario government had no intention of proceeding with the introduction of the federal PRPP model. In fact, the Ontario government was still advocating for CPP enhancement. Therefore, proroguing of the legislature probably had no impact on the roll out of PRPPs in Ontario. It wasn’t going to happen anyway.”-Robin Pond, senior investment and DC consultant, Buck Global Investment Advisors

“To date I’ve seen no evidence that that anyone in the McGuinty government supports PRPPs – the Ontario budget documents from earlier this year make clear that the Ontario government preferred CPP expansion, as Fred notes. Unless there is a change in government, I think it unlikely that Ontario will see PRPPs introduced anytime soon.“-James Pierlot, principal, Pierlot Pension Law

As an engaged observer, I believe that the political winds in Canada have shifted away from the PRPP initiative. Other than Menzies, it seems to me that nobody has much interest in PRPPs.

On the pensions front, lack of private sector pension coverage is now yesterday’s news (the real underlying rationale for PRPPs) and “pension envy” in relation to public sector pensions is the pension story that has all of the attention.

Political avoidance
Traditionally, politicians have avoided pensions like the plague. One reason is that inevitably political discourse on pensions leads to scrutiny of their own arrangements. Another reason is the overwhelming complexity of pensions and the difficulty of implementing good policy on a topic that is so difficult to simplify in a political context. Thus, strong and focused political motivators are required for forward political movement on any particular pension initiative. I believe the focus on PRPPs has now been lost.

The federal government is the only jurisdiction that has passed PRPP legislation. Quebec’s version of the PRPP, the voluntary retirement savings plan (VRSP), died on the order paper as their provincial election was called and now the Parti Québecois (with a new finance minister) is in power.

Ontario’s 2012 budget characterized PRPPs as “flawed” and indicated Canada Pension Plan (CPP) changes should accompany PRPP implementation. A new Liberal leader in Ontario might change their current pension policy, but I expect an election call would have much higher likelihood. As far as I am aware, no other province has taken any concrete steps towards implementing PRPPs.

The federal legislation is not sufficient to create a PRPP market, for two reasons. First, the federal legislation did not contain any mandatory requirement for employers to provide employees access to a pension plan, and second most federally regulated employers are larger enterprises that already offer pension plans to their employees.

The weak federal leadership on PRPPs coupled with the shift of political attention to address “pension envy” of relatively generous public sector pensions has stolen the focus from PRPPs. Nonetheless, the underlying problems of low (and declining) private-sector pension coverage and adequacy of savings for retirement income security remain.

No doubt, government policymakers and advisors will continue to work on these issues. At some point, perhaps, the mythic “pension champion” will come to the fore to provide political leadership to implement an effective variant of the PRPP or achieve sufficient provincial consensus to bring Alberta and Québec into the fold to support CPP expansion.

In the meantime, Canadians working in the private sector should appreciate any workplace pension arrangements that are provided to them, as they otherwise remain left to their own devices.

Greg Hurst is a Vancouver-based pension consultant with Greg Hurst & Associates Ltd.

These are the views of the author and not necessarily that of Benefits Canada.

© Copyright 2014 Rogers Publishing Ltd. Originally published on benefitscanada.com

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See all comments Recent Comments

don domae:

to all concerned a message from me the prpp is a joke
i started to collect cpp at 60 i had to take one month off of work now they have changed you do not have to take time off i am still working so now i am forced to pay into the prpp 2012 i paid the max $2306.70 plus the employer share $2306.70 total $4613.40 I will get a pension of $25.31 a month for a total of $303.72 what a joke look a the fiqures and guess who making the money the people who are incharge of this plan. please submit a article on this prpp.

Saturday, February 02 at 2:49 am | Reply

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