14 October 2011
Retirement savings – PRPPs need further safeguards, CPP enhancement still needed: CARP – Reaction to Minister Menzies’ Speech on Pooled Retirement Pension Plans [PRPPs]
Speech by the Honourable Ted Menzies, Minister of State (Finance) to the Investment Funds Institute of Canada:http://www.fin.gc.ca/n11/11-100_1-eng.asp
Toronto, ON: CARP is calling on the government to include CPP enhancement and greater safe guards on PRPPs to offer real retirement savings options. The recent changes in the political landscape after the provincial elections and leadership contests provide the opportunity to re-visit getting a federal-provincial-territorial consensus, especially on CPP enhancement.
“The political landscape has changed dramatically since the PRPPS were first announced and the CPP-enhancement portion sidelined. Minister Menzies should be congratulated for moving on plans for a new retirement savings vehicle but he should revisit getting a consensus on the modest CPP-enhancement along with better safeguards on PRPPs. We should not be satisfied with the least of the options”, said Susan Eng, VP Advocacy, CARP.
In a speech to the IFIC, Minister Menzies announced that implementation of the proposed PRPPs is moving apace and was the only new retirement savings option on which there was a consensus. While he did not mention it by name, a modest CPP enhancement was proposed along with the PRPPs after the Finance ministers’ meeting in June 2010 but objections from Quebec and Alberta sidelined the CPP enhancement aspect.
The then Alberta Minister of Finance was the most vocal opponent of any CPP enhancement but in the new Alberta cabinet, the Minister of Finance is Ron Liepert. Other provinces which were in support of a modest CPP enhancement were re-elected, notably Ontario, Manitoba and PEI. This presents an opportunity to revisit the modest CPP enhancement which requires the consensus of two thirds of the provinces with two-thirds of the population and the Parliament of Canada.
In CARP polls, CARP members have consistently preferred a mandatory, defined benefit, CPP-like option over the voluntary, private sector administered, defined contribution characteristics of the PRPPs. CARP members were encouraged when both the PRPPs and the modest CPP enhancement were announced as complementary solutions for the retirement savings gap but very disappointed that the federal and provincial ministers were not able to arrive at a consensus to move ahead on the CPP-enhancement aspect.
CARP has also raised concerns about the PRPPs as they are currently proposed, and have recommended safeguards, including:
- Fee caps to prevent high fees from eroding savings – as has occurred in a similar Structure in Australia http://www.carp.ca/o/pdf/australia%20example.pdf
- Risk management – limit on asset categories
- Managing executive compensation including clawbacks for poor performance
- Auto-enrolment with opt out to improve uptake
- Revisit offering target benefits to pool risk rather than the proposed defined contribution scheme which leaves the market risk with the member/retiree
For further information, please contact:
Pam Maher 416.607.2475
Policy Development and Government Relations
Vice President Advocacy
CARP, A New Vision of Aging for Canada
or visit our website: www.carp.ca