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PRPPs are a no-brainer

PRPPs are a no-brainer

The debate across Canada around Pooled Registered Pension Plans is a tad surprising. It seems that many industry insiders are determined to resist change even though the current pension system is not ideal. However, criticism of the PRPP initiative continues to be featured heavily in the press and it is not helping people to feel confident about the approach.

Research by Manulife shows that small and medium sized businesses are reluctant to implement any type of pension scheme for their employees, primarily based on the fact that pension schemes were difficult to organise and administer. Some of this resistance is undoubtedly coming from the range of conflicting comments about PRPPs in the press. Those who should know better continue to carp about PRPPs and are creating doubts in the minds of those employers and employees whom are the primary target of the plans.

Harper’s government should be given the credit for realising these problems and designing a system, under which the majority of the complexity can be off-loaded to the pension providers, thereby easing the burden on Canadian businesses. But unless we can get this message across, too many businesses will steer clear of entangling with what they believe is a complicated distraction from their core business.

If that happens, the Government will be left with only two options: make provision of a pension plan compulsory for all employers or abandon the project and just hope that enough people will start saving for retirement of their own accord.

Obviously giving up isn’t an option, considering the well-rehearsed problems that will come about due to the ageing workforce. And, for some reason, the government feels unable or unwilling to go down the more obvious compulsion route.

Therefore the only option for the government is to make the introduction of PRPPs a success. In order to do so, they need to undertake a major sales drive to ensure that the product is fully understood by the target audience and to remember that the audience is not just the employees but the employers as well.

Employers need to be persuaded that the use of a PRPP will benefit their business by providing for the needs of their employees. It will also benefit the overall economy in the long run by reducing the drain on the country’s coffers that will come from the ever-expanding retired section of the population. And, most importantly, employers need to get the message that they will be able to outsource the majority of the work involved to the pension provider, so it won’t get in the way of their real work.

PRPPs are not a perfect or indeed a total solution to the pensions’ issue, but they have many good features and can make a good contribution to the overall solution.
Confidence in the pension’s industry is fragile enough. Industry analysts need to be very careful that they are not sowing more distrust in the system just for their own enjoyment of the verbal joust.

Tom Murray

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