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| Minister Promotes New Canadian Pension Vehicle |
by Mike Godfrey, Tax-News.com, Washington
Thursday, February 02, 2012
The introduction of Pooled Registered Pension Plans (PRPPs) will bridge gaps
in Canada’s retirement income system, the Minister in charge has said.
Speaking at the C.D. Howe Institute, Ted Menzies, Minister of State (Finance),
held a roundtable to discuss how this new pension vehicle will affect retirement
planning. He said, "Canada’s Finance Ministers have agreed to proceed
with a framework for the introduction of a new kind of pension plan, the PRPP.
The PRPP is a targeted way to help millions of Canadians who have not previously
had access to a large-scale, low-cost company pension plan.”
The government is in the process of consulting on proposals for the creation
of PRPPs. Legislation was introduced in November last year for the federal implementation
of the scheme, while in December the consultation process was launched to enable
the provincial governments to follow suit. The legislation will amend the current Income Tax Act and the Income Tax Regulations to accommodate the establishment of PRPPs, which are intended to be largely
harmonized from province to province to help lower administrative
costs.
Under the new scheme, PRPP members will “pool” their pensions through
their administrators. According to Menzies, the design features of PRPPs will
address barriers that might have kept some employers in the past from offering
pension plans to their employees.
The government believes that, by pooling pension savings PRPPs will offer greater
purchasing power, achieving lower costs than would otherwise be available. In
addition, professional administrators will be subject to a fiduciary standard
of care to ensure that funds are invested in the best interests of plan members.
The organisation of these plans will also be straightforward to allow for simple
enrolment and management.
“Participation in privately administered and well-regulated workplace
pensions will be encouraged by automatic enrolment of employees into a PRPP,
where an employer offers one. By making participation automatic, Canadians will
save more and our retirement income system will be healthier as a result,”
Menzies concluded.
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