[TORONTO, ON] - The federal government has embarked on a final cross-country tour to discuss a new way for small businesses and self-employed people to set up retirement savings plans, with legislation expected to be tabled later this year.
“We've tasked our officials, both federal finance departments and provincial finance departments, to work on the fundamentals of the (pooled registered pension plans) and they've brought a lot of things to the point where we're very, very close to being able to draft legislation,” said junior federal finance minister Ted Menzies.
Pooled registered pension plans, known as PRPPs, would give small businesses and self-employed people more resources to set up retirement programs by allowing them to pool money with other employers.
The government says the large-scale, optional pooled plans would be managed by a regulated financial institution, which would decrease the cost and complexity for a small employer.
Menzies then left Toronto and headed to Fredericton to meet with officials in New Brunswick. He also plans to sit down with small business owners, financial institutions, and other stakeholders before the end of August.
Federal finance department officials will then write the final draft of legislation, which Menzies said will be tabled by the end of the year. Each province must also introduce its own bill on the plan as pensions are administered by both provincial and the federal government.
Quebec became the first province to introduce the new system in its 2011-2012 budget in March. The province has said that it wants its counterparts to follow its lead.
Saskatchewan also has a similar plan in place, under which employees, self-employed individuals and/or their spouses can contribute up to $2,500 annually.
“Time is of the essence because we've been looking at pensions overall since the end of 2008,” Menzies said.
“Having listened to Canadians, we found that there was a goodly amount of Canadians, probably over 60 per cent, that did not have any type of workplace pension plan whatsoever.”
Finance ministers first agreed to examine the potential for the plans at a December 2009 meeting on pensions in Whitehorse, as part of a report that noted Canadians may not be saving enough for retirement. A proposal for PRPP legislation was put forward at a meeting of finance ministers last year in Kananaskis, Alta.
The federal government has come under pressure to increase benefits because the global recession and resulting stock market fallout have taken a big chunk out of private retirement savings plans.
Both pooled pension plans and the prospect of expanding the public Canada Pension Plan have been bandied about as a potential solution as aging baby boomers leave the workforce and there are fewer workers to pay into the fund.
As a provincial fight about expansion of the CPP continues, Federal Finance Minister Jim Flaherty has suggested the PRPPs would be a good alternative to increasing public plan costs as the global economy remains fragile.
Menzies, an MP in Alberta, one of the provinces opposed to expansion of the CPP, said the government continues to examine the issue of expanding the public fund.
“(But) all of the provinces agreed that this was the best thing to do, it would provide the best overall coverage and cause the least amount of harm to businesses,” he said.
“Talking to businesses, they were concerned about doubling their costs, or whatever the amount is, so they felt it was pretty important that we continue on this path.”
The plan would be a big boost for banks, insurance companies and other financial institutions, who stand to gain new business opportunities. Many of them have been proponents of the creation of such a private-sector solution.
But critics say pooled plans, administered by banks and insurance companies, would leave out too many people because contributions would be voluntary.
The government has said a high level of regulatory harmonization across federal and provincial governments will be required to increase the scale of such plans.
Potential tax changes to accommodate those plans would be developed and implemented by the federal government.