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Canada Promotes New Pensions Vehicle

by Mike Godfrey, Tax-News.com, Washington

22 February 2013


Canada's new Pooled Registered Pension Plans (PRPPs) will provide a low-cost private pension option for small and medium-sized businesses and their employees, the Minister of State for Finance has said.

Speaking at the National Summit on Pension Reform, Ted Menzies pointed out that an estimated 60% of Canadians do not have access to a workplace pension plan. In an effort to address this challenge, Menzies said, the government has introduced PRPPs. PRPPs will offer "a large-scale, broad-based pension option available to employees – with or without a participating employer – as well as the self-employed."

Under the scheme, workers will be able to "pool" their pensions through their administrators. Most of the administrative and legal burdens associated with a pension plan will be borne by a qualified third-party administrator, subject to a fiduciary standard of care. Automatic enrolment will take place where an employer offers a PRPP.

The federal portion of the PRPP legislation entered into force in December, putting in place the regulatory changes required to implement the new system. The intention is for the schemes to be largely harmonized across provinces and territories, in order to encourage lower administrative costs. The relevant tax rules will apply to both federally and provincially regulated PRPPs.

Menzies is now calling on the provinces and territories to introduce legislation to make PRPPs a reality. He stressed: "With the federal framework now fully in force, it’s up to the provinces and territories to implement their own legislation."

TAGS: Finance | tax | business | pensions | employees | legislation | Canada

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