The Investment Industry Association of Canada (IIAC) has come out against the idea of introducing a voluntary supplement to the Canada Pension Plan (CPP), saying that the rules for existing private savings options should be tweaked instead.
The IIAC has issued its response to federal government consultations, launched last month, to explore the idea of creating a new voluntary expansion of the CPP — concluding that it’s not worth the effort.
“The costs of creating and administering the voluntary CPP supplement may … prove to be much larger than any savings benefits that could be achieved,” the IIAC says in its submission to the Department of Finance Canada consultation.
The Conservative government has resisted calls to expand the CPP, saying that it believes that such a move would harm the job market and the economy. However, in July, Finance Canada launched a consultation to examine the idea of allowing additional voluntary contributions, which would allow employees to boost contributions to the public pension plan as a way of increasing their retirement savings in a cost-efficient way — but without mandating the additional contributions.
In its submission, the IIAC argues that a voluntary CPP supplement is not necessary, and would require a “costly new infrastructure to administer individual accounts, including monitoring deposits, and potentially withdrawals and transfers.” It also warns that employers could face additional administrative costs.
Instead, the government should continue to tweak the rules for private retirement savings vehicles, such as RRSPs, TFSAs, and RRIFs, the IIAC says. “The IIAC believes targeted reforms to existing federal tax-assisted savings programs will have a greater positive impact on the retirement savings gap than a voluntary CPP supplement,” the IIAC submission concludes.
The submission suggests boosting RRSP contribution limits; making the RRSP contribution rules more flexible to account for fluctuating incomes due to events such as periods of unemployment, maternity/paternity leaves, and sabbaticals; and harmonizing the tax treatment of group RRSPs and defined contribution pension plans. It also reiterates the IIAC’s call for the government to eliminate mandatory minimum withdrawals from RRIFs.
Alghough these sorts of changes will cost the government some tax revenue in the short term, the submission concedes, it notes that the tax is largely being deferred, not lost entirely.
The Finance Canada consultation on creating a voluntary supplement to the CPP ends on Sept. 10.