[dropcap letter="T"]he recent budget from the government of British Columbia (BC) was notable for its take on the Pooled Registered Pension Plan strategy. Unlike the original Quebecois proposals, which mandated provision and contribution by employers, the BC government’s approach seems mindful of the need to get people saving for their retirement without driving up the cost of labour, which might make it harder to employ people.
After all, what’s the value of a plan to improve people’s lifestyle in retirement if it comes at the price of involuntary retirement for others because it makes industry uncompetitive?
Instead, the BC Liberals have made the employer contribution voluntary. This is a far better approach as it brings home clearly to individuals that the responsibility for their retirement income is their own, not their employers’ or the taxpayers’. It is a vital plank of any long-term solution to the pension’s crisis that employees come to realise that their lifetime earnings have to sustain them in retirement. Effectively every four weeks’ paycheque has to cover six weeks of life’s expenses; the other two weeks will occur in retirement for those who live the average of 20 years in retirement.
Contributions by employers to pension schemes will happen in industries where there is some value to the company to provide them e.g. in industries where most other employers in the market make pension contributions, it may be important to do so in order to attract or retain staff. But BC have avoided foisting this extra cost onto industries who are competing against companies in other provinces or countries where this would not be the norm.
Ideally, the extent to which employers should be involved is in areas such as the provision of the facility to contribute to PRPPs via the payroll system and to allow access to information / advice services. In this area, BC has slipped as they ducked making it compulsory for employers to provide access to these plans via payroll, a key determinant in getting those on lower incomes to save.
Encouraging people to save for their retirement is very important for all developed countries. Forcing up the unit cost of labour is not the way to go about this and all governments should be wary of any approach that could ultimately lead to less people at work. If there is to be any compulsion involved in the pension strategy, it should bear upon the employee to make him or her save and should not focus on an employer contribution that could do more damage than good, both to the overall economy and to the domestic economy of the employee in particular.
British Columbia has made a good start but could have gone a bit farther without penalising employers. Quebec, and those provinces yet to start dealing with this problem, should take note.
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