It’s being called another tool to help people to save for their futures.
Pooled Registered Pension Plans (PRPPs) are coming to Manitoba, and small businesses and their employees will benefit, said Loren Remillard, president of the Winnipeg Chamber of Commerce.
“The battle for skilled employees is stronger than its ever been,” Remillard told CBC News. “Today, when you go to negotiate, when you get offered a position at a company, it’s not just about salary. It’s much broader now.”
Manitoba’s small businesses will benefit by being able to offer their employees a pension plan the business can afford to contribute to, Remillard said. In turn, it will help smaller businesses attract and retain talent.
How PRPPs work
PRPPs work much like a regular pension plan offered by any big company, Remillard said. Both the employee and the employer contribute to a savings plan, which will pay out a monthly sum when the employee retires.
However, the cost of running and administering a PRPP is spread out over many companies, with many people contributing, he said. This means lower setup and administration fees for smaller businesses, and therefore more opportunities to contribute to a registered savings plan for employees.
The pooled plan is overseen by federal legislation and run by licensed administrators, Remilard said. And unlike Registered Retirement Savings Plans (RRSPs) run by employers, there are also tax breaks for businesses that contribute.
Employees who leave their companies do not leave the plan, he added, unless they want to. Self-employed people, or people whose companies do not offer any kind of pension plan, are also welcome to join by contacting a plan administrator directly. “
“You’re a one-person shop,” Remillard said. “Now you can actually participate in these pooled plans and save for your retirement.”
Think-tank not convinced
However, think-tank the C.D. Howe Institute criticised PRPPs when they were introduced in 2012 by the Harper government, calling the plans too similar to current RRSP plans.
“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,” the institute said in a report released in 2012, adding major tax changes were needed to make the plans more effective.
However, several provinces have since signed on, including Alberta, Saskatchewan, Quebec, British Columbia and Nova Scotia.
Once Manitoba signs an agreement with the above provinces, expected to happen this fall, administrators can offer PRPPs in the province.
Remilard stressed that PRPPs do not replace the Canadian Pension Plan or personal RRSPs. “It’s really one option out of many options to promote and encourage people to save and invest for their retirement.”