Pooled Registered Pension Plans: Pension Saviour - or a New Tax on the Poor?

In June 2012, the regulatory framework for a promising new retirement savings vehicle, Pooled Registered Pension Plans (PRPPs), was passed into Canadian federal legislation. The hope is that PRPPs will improve pension coverage and retirement-saving outcomes by reducing costs and improving investment returns through asset pooling and third-party administration. Since most employers under federal pension legislation are already providing pension coverage to their employees, PRPPs were introduced in the expectation that provincial governments would follow the federal lead and adopt PRPPs for the vast majority of Canadian workers under provincial pension jurisdiction. As of now, only the province of Quebec has announced its intention to create its own distinct version of PRPPs, branded Voluntary Retirement Savings Plans. Although the intentions behind PRPPs are commendable, PRPPs represent only a mild improvement over existing options such as Registered Retirement Savings Plans (RRSPs) and defined-contribution (DC) pension plans. This is because tax rules for PRPPs – essentially identical to those that apply to RRSPs and similar to those for DC plans – will prevent many private-sector workers from saving enough for retirement and from receiving retirement income in the form of a life pension.