TORONTO -- The C.D. Howe Institute is calling for significant changes to Ottawa's proposed new pension system, dismissing it as a re-release of the existing RRSP shelter "with a new coat of paint."
In fact, a new study by the Toronto think-tank released Thursday says Pooled Registered Pension Plans as currently designed should be avoided by many low- and middle-income Canadians. However, the report, entitled Pooled Registered Pension Plans: Pension Savior -- or a New Tax on the Poor? says PRPPs could be vastly improved by changes to tax rules.
"As currently proposed, PRPPs present only the appearance of reform because they are for the most part a re-release of an existing retirement savings vehicle -- RRSPs with a new coat of paint," said James Pierlot, a pension specialist and member of the Pension Policy Council of the C.D. Howe Institute.
Introduced for federally regulated employees in June, PRPPs are intended to improve pension coverage and retirement-saving outcomes by reducing costs and improving investment returns through asset pooling and third-party administration.
But since most employers under federal pension legislation are already providing pension coverage to their employees, the expectation was most provincial governments would follow the federal lead and adopt PRPPs for the vast majority of Canadian workers, who are under provincial jurisdiction. So far that has not been the case.
Minister of State for Finance Ted Menzies defended PRPPs as a new tool to help Canadians save differently.
"That's why our government introduced the TFSA -- the most successful savings tool since the RRSP. We are now expanding the retirement savings system with PRPPs," he said in a statement Thursday.
"Taken together, these products are providing more savings options for more Canadians than ever before."
But the Howe Institute study says PRPPs represent only a mild improvement over existing options such as RRSPs and defined-contribution pension plans because tax rules for all three are essentially similar.
-- The Canadian Press