The Portfolio Management Association of Canada is adding its voice to groups calling for a delay to the introduction of the Ontario Retirement Pension Plan.
In submissions this week to Finance Minister Bill Morneau in advance of the upcoming federal budget, the association representing more than 220 investment management firms urged the federal government to work with Ontario to delay the ORPP for at least a year to allow for discussions on reforming the Canada Pension Plan.
The message was reiterated in a letter yesterday to Ontario Premier Kathleen Wynne elaborating on PMAC’s concerns. “We’re consistently not supportive of Ontario-only solutions,” says association president Katie Walmsley, who notes it’s instead calling for continued discussions on CPP reform, including small changes such as raising the year’s maximum pensionable earnings level or increased contribution rates. “It could certainly include that,” she says.
“Ontario moving forward with ORPP implementation prior to the federal, provincial and territorial finance ministers having the opportunity to fully evaluate reform to CPP is simply unfair to all Canadians and will have a tremendous impact on the outcome of pension reform discussions,” she wrote in her submission to Morneau.
The association’s moves follow similar calls by groups such as the Canadian Life and Health Insurance Association and the Association of Canadian Pension Management. But with Wynne and the associate finance minister having made clear their determination to implement the ORPP starting next year, what’s the likelihood of a delay?
“I think it is possible,” says Walmsley, citing the Ontario government’s long-stated position that it would prefer CPP expansion to the ORPP. Walmsley also says the mounting questions — including how national employers will integrate the ORPP into their pension programs — are a significant concern as the 2017 deadline for implementation approaches.
“They have to decide how they will handle Ontario and the other provinces,” she says, noting many employers are still figuring out what the impact will be on their plans.
One concern, she adds, is for younger employees who may choose to lower their contribution levels in their employer pension plans in order to save for things such as buying a house. If they drop them too far, she notes, they may end up having to contribute to the ORPP instead. “Their attempt to save a bit will be thwarted,” says Walmsley.
Besides the ORPP, the association made several other recommendations to Morneau. These include:
- Treating CPP contributions as tax deductions rather than credits to align them with pension plans and registered retirement savings plans;
- Increasing the RRSP contribution limit by 20% to encourage savings in a volatile market;
- Providing incentives to employers to start or boost their retirement programs;
- and exempting investment management service fees from the goods and services tax.
In addition, PMAC is calling on the government to introduce tax incentives to spur participation in pooled retirement pension plans through, for example, an employer/employee retirement savings grant.
“We believe PRPPs will help address a gap in private savings and leave more money in the pockets of Canadians,” wrote Walmsley.
When it comes to the ORPP, Walmsley says the big concern is duplication of the private pension schemes that are already in place. Asked about the potential criticism that her association has an interest in the private pension business, Walmsley responds that many of its members also do work on behalf of public plans like the CPP and would likely have an involvement in the ORPP as well.
“I think, in either of these solutions, assets are moving around,” she says. “I think we’re probably one of the most agnostic groups in terms of which direction it goes.”