The investment industry is applauding Finance Minister Jim Flaherty’s proposed pension system reform framework, which would allow small businesses, employees and self-employed workers to set up low-cost pension plans through private sector financial institutions.

“Pooled Registered Pension Plans fill an identified gap in retirement savings options by providing small companies and self-employed Canadians with an alternative retirement savings vehicle,” said Ian Russell, president and CEO of the Investment Industry Association of Canada. “PRPPs offer the potential for economies of scale to lower administration costs and management fees.”

The Investment Funds Institute of Canada said it also supports the proposal for multi-employer pension plans “as one element of a balanced set of reforms targeted to improve retirement income options for Canadians.”

IFIC said registered pension plans and registered retirement savings plans available in the workplace should be more efficient and accessible, and that Canadians should have the freedom to use multiple sources and choose how they want to save for retirement.

The Standard Life Assurance Company of Canada also supports Flaherty’s proposed framework.

“Pooled Registered Pension Plans could be a milestone to improve access to pension arrangements and encourage Canadians to save for retirement,” said Joseph Iannicelli, president and CEO of Standard Life.

“Employers and employees would benefit from the expertise and experience of Canadian financial institutions in the role of administrators of PRPPs,” Iannicelli added. He noted that Canada’s life and health insurance industry currently administers 70% of Canadian pension plans.

IFIC recommends that the pension framework encourage the participation of “the broadest range of investment providers, in addition to trust and insurance companies, that meet the proposed or equivalent standards.”

“This will ensure strong competition and innovation among providers,” IFIC said.

IIAC recommends that investment dealers registered with the Investment Industry Regulatory Organization of Canada should be eligible as PRPP administrators.

“Registered investment dealers in Canada are effectively regulated, subject to high standards of proficiency, conduct, operation and governance,” said Russell. “Investment dealers should be permitted to administer PRPPs, subject to appropriate custodial arrangements with regulated trust companies, as for other registered retirement products.”

IE