Private Pensions Face Greater Regulatory Burden

pension-fundPrivate pensions face more regulations, are more complex in their structure and therefore pay higher costs than the CPP, says a study from think tank the Fraser Institute.

Understanding the Regulatory Framework Governing Private and Public Pensions” compares the rules and regulations governing the CPP with other private and public-sector pensions and private registered accounts, including TFSAs and RRSPs.

Private pensions face greater regulations around customer-related and disclosure requirements, such as regular financial statements, provincial rules and industry-organization standards, the study says. As a result, the pensions face additional costs.

“Too often people jump to the conclusion that the CPP’s comparatively lower costs are a function of efficiency, but the reality is that substantial regulations are imposed on private plans that the CPP avoids,” said Moin Yahya, co-author of the study, in a release.

Private pensions also have different features from the CPP that affect their costs, the study says. For example, private pensions have to account for transferability from one plan to another while CPP contributions are not transferable.

The CPP doesn’t allow contributors to choose where their funds are invested, as opposed to some defined contribution pensions, RRSPs and TFSAs, the report says. The CPP also doesn’t have to anticipate or defend any liabilities, whereas private pension plans must account for threats of litigation.

Read the full report here.


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