The Investment Industry Association of Canada (IIAC) is opposing plans for a new provincial pension plan in Ontario, arguing that it will be costly and could have unintended consequences.
In response to the provincial Ministry of Finance’s consultation on the design of a proposed new Ontario Retirement Pension Plan (ORPP), the IIAC says that it has concerns with the proposal, including that it would have substantial startup and administrative costs, and could have a negative impact on small businesses and investment in Ontario.
“We are disappointed at the haste in moving forward with the ORPP, before an adequate response is provided to important questions that have been raised,” the IIAC says in its submission.
For example, the investment industry trade group argues that the provincial government should conduct a thorough analysis to determine the real shortfall in retirement savings, and how the ORPP will reduce that gap. “The retirement savings shortfall will likely affect only middle income individuals without a workplace pension plan and those that have not accumulated savings in a tax-assisted plan, such as an RRSP,” it says. And, it suggests that this may change as efforts to promote financial literacy, “will have a long-term positive impact on the savings behaviour of Canadians. “
The IIAC also argues that the government must fully analyze the costs and benefits of the ORPP, including the costs to establish the plan, and the impact of increased payroll taxes on small business growth and job creation. “Many Ontario employers will be unable to sustain the costs of both the mandatory ORPP as well as existing group RRSP plans, and be forced to abandon group RRSPs that often meet the needs of employers and their employees,” it says; arguing that participation in the ORPP should be optional for employers with existing group RRSP plans.
If the ORPP displaces private savings, “The ultimate result will be reduced flexibility and choice for employers and investors, and overall weakening of the Ontario financial services sector that provides wealth management services to Ontarians,” the IIAC argues. “This outcome will have a negative economic impact that will be felt across all of Canada.”
Instead, the trade group says that existing federal retirement savings programs should be reformed. For instance, it says that employers offering group RRSPs should be treated the same as those with traditional workplace pension plans; that RRSP contribution rules should be liberalized; and, that the minimum annual withdrawal rules for RRIFs should be either scrapped, or relaxed.