Pooled Registered Pension Plan (PRPP)

The Federal Government recently passed Bill C-25 also referred to as the Pooled Registered Pension Plan Act. while still in its infancy, and with many details still to be drawn up, this plan provides yet another method for Canadians to save for their retirement. Standard Life has put out a good summary of what we know thus far. I have linked it below. I have also summarized what I feel are the most important parts.

Rob's Summary

• All employers will be required to offer the plan to all employees working for at least 24 months.
• Employees will be "auto-enrolled" and can opt out.
• Employees can voluntarily contribute a percentage of their earnings to the PRPP by payroll deductions.
• The employer is NOT required to match or contribute (at this time, this could change)
• The suppliers of these plans will largely be existing financial institutions such as banks and insurance companies
• Investment fees are to be kept to a minimum <1%
• Since fees are to be kept so low there will be a very low level of service, there is no overhead to pay for extra service or pay advisors commissions.
• All contributions are LOCKED IN
• Access to the Home Buyers Plan and Lifelong Learning Plan tax free withdrawals/loans are not allowed
• Investments will presumably be a list of funds similar to today, but likely focusing more on Asset Allocation and Target Date/Retirement Date Funds
• There is currently no default fund selected but it is expected to be a Retirement Date fund targeting retirement at age 65.
• This is likely a good thing for Canadian, as our savings rate is abysmally low, however, as this is currently voluntary, it is doubtful that many employees will participate in the PRPP if employers don't match, and even then there are drawbacks to the PRPP such as the locking in provision and loss of Home Buyers Plan and Life Long Learning Plan when compared to the also voluntary RRSP.
• Broker are going to hate the PRPPs. They will pay little or no commissions. Pension managers with large blocks of business are already terrified that their commission stream is going to dry up. There will certainly be a shift in how we as advisors market and sell group savings plans. Many will switch to a fee for service model, provide little or no service, or exit the market all together. It will be interesting to see how the industry reacts to this new plan and its implications on our bottom line.
• Similar plans have recently been launched in Australia and the UK. in those countries the employer must match employee contributions, which some expect may come to the PRPP if adoption rates are low.

Everything listed above is correct to the best of my knowledge at the time of writing, as many details have still yet to be finalized they may change in the future. That being said take everything above with a grain of salt, as very little is concrete at this point in time.

Standard Life Summary


*edit; Spelling


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Robert Reynolds, GBA
Certified Group Benefits Advisor
Hendry McKenzie Reynolds Employee Benefits Ltd.

Toll Free: 1-888-592-4614
rob@hmrinsurance.ca
www.hmrinsurance.ca

E.O. E.