Pooled registered pension plans (PRPPs) as a solution to increase pension coverage for Canadians is a notion that was widely supported in the industry when the government announced its commitment to move ahead with the strategy last month. As industry experts recognize that this is surely a step in the right direction, some feel it’s not quite a big enough one.
Paul Forestell, senior partner with Mercer and retirement risk and finance business leader for Central Canada said yesterday at the consulting firm’s Pension Outlook and Fearless Forecast that he supports this initiative but doesn’t have a lot of faith in dramatic results.
“It’s not hard to support the pooled registered pension plan,” he said. “If implemented, it will be a positive step for retirement savings in Canada. But probably just a very small step.”
While PRPPs would give small employers an affordable way to enable group retirement savings for their employees, Forestell explains such plans would also have low fees and prudent default investment options, under the government’s proposal. However, he says, as a voluntary program PRPPs aren’t likely to increase pensions coverage in Canada.
“I’m not certain that this will be enough incentive for employers that do not currently provide any retirement savings options to join a pooled RPP,” Forestell says. “Those employers that currently provide a group RRSP or DC pension plan may elect to switch to a pooled RPP. But I doubt that other employers will move quickly on this.”
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