The Honourable Ted Menzies, Minister of State (Finance), today spoke to the Economic Club of Canada in Toronto about the role of private sector pension innovation in supporting a strong retirement income system for Canadians.
"The Harper Government is acting in accord with the Organisation for Economic Co-operation and Development’s conclusion that a growing role for private pensions will be essential to closing the pension gap," said Minister Menzies. "This gap is 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 Pooled Registered Pension Plan (PRPP) framework is an important step towards offering an innovative, new, low-cost private pension option to the millions of Canadians currently without access to a workplace pension plan, including 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.
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 involve pooling large funds, so that Canadians will benefit from lower management costs. In effect, Canadians will be buying in bulk, leaving 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.
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.
PRPPs will be available across Canada once recently published PRPP regulations are in place and federal tax legislation is passed, and once the provinces implement their respective PRPP legislation.
"This is encouraging, and an excellent example of what can happen when governments work together and deliver results for Canadians," said Minister Menzies. "PRPPs are the right solution at the right time to help many Canadians better save for their retirement. It would be a shame should provinces choose not to expand coverage for those without workplace pensions as soon as possible."
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
