The Honourable Ted Menzies, Minister of State (Finance), today spoke to the Burlington Chamber of Commerce about how Pooled Registered Pension Plans (PRPPs) will offer an innovative new private pension option for the millions of Canadians currently without access to a workplace pension plan.
"Our Government is committed to ensuring that Canada’s retirement income system remains effective and well-balanced in an ever-changing world that is full of challenges," said Minister Menzies. "These challenges are real. It is estimated that more than 60 per cent of Canadians do not have access to a workplace pension plan."
The recent passage by the House of Commons of the federal PRPP framework is an important step towards offering a new, low-cost pension option to employers, employees and the self-employed. Once operational, PRPPs will allow many small business owners and their employees to have access to such a plan for the very first time.
Most of the administrative and legal burdens associated with a PRPP will be borne by a qualified, licensed, third-party administrator. These administrators will be subject to a fiduciary standard of care, which will ensure that funds are invested in the best interests of plan members. This legal hurdle has discouraged many small businesses from offering a workplace pension plan.
PRPPs are the result of federal and provincial governments working together to help ensure the long-term strength of Canada’s retirement system. There was unanimous agreement at the December 2010 meeting of federal and provincial finance ministers to pursue a framework for PRPPs as an effective and appropriate way to help bridge existing gaps in the retirement system. PRPPs will be available once the provinces pass their enabling legislation.
PRPPs will involve pooling large funds, so that Canadians will benefit from lower management costs. In effect, they will be buying in bulk. This will leave more money in their pockets when they retire. PRPPs are also intended to be largely harmonized between provinces and territories, which will encourage lower administrative costs.
"The Organisation for Economic Co-operation and Development recently concluded that a growing role for private pensions will be essential to closing the pension gap," said Minister Menzies. "With the introduction of PRPPs, we are taking that action. They are the right solution at the right time to help many Canadians better save for their retirement."
For further information, media may contact:
Bram Sepers
Communications
Office of the Minister of State (Finance)
613-996-7861
Jack Aubry
Media Relations
Department of Finance
613-996-8080
