A new senate committee report calls for a slew of changes to Canada’s retirement savings system. These include a new national savings plan that the investment industry warns will duplicate savings mechanisms that already exist.

The standing Senate committee on banking, trade and commerce has released a report urging the federal government to establish a Canada-wide voluntary savings plan. The recommendation is one of several proposals that the committee’s report says would encourage Canadians to save more for retirement.

The report summarizes months of research and consultations on the effectiveness of existing retirement-savings vehicles. The report identifies several disparities in the current system. For example, it found gaps between those with and those without an occupational pension plan; between defined-benefit and defined-contribution pension plans’ members; and between public-sector and private-sector pension plans’ members.

Senator Michael Meighen, chairman of the Senate committee, said in a statement: “While the nation’s retirement savings system seems to be working quite well for a number of Canadians, it would benefit from some changes being made, particularly for such groups as middle-income Canadians, self-employed persons and employees of small and medium-sized employers that may face barriers in sponsoring an occupational pension plan.”

According to the report, a national voluntary plan would help bridge the gaps in the system, boosting savings and enabling all Canadians to benefit from the lower fees and shared risk that result from membership in a large group plan.

The report recommends that all Canadians over age 18 be enrolled automatically in the plan with the right to opt out, and that employers have the ability to make contributions on behalf of employees. Individuals would be able to choose from a selection of about five professionally managed funds that would vary in their investment objectives, fee structures and types of holdings.

The Toronto-based Investment Industry Association of Canada, for its part, argues that establishing another large-scale public-sector savings plan would be redundant.

“There is a delivery mechanism to facilitate this process and to enhance savings, and that already exists in the financial industry,” says Andrea Taylor, a director with the IIAC. “A large-scale overhaul, or duplication of what already exists, probably won’t benefit many.”

The proposed plan would impose hefty costs on employers and taxpayers, and wouldn’t incorporate enough flexibility to meet individual investors’ specific objectives, Taylor says. The financial services industry could help Canadians make better use of existing tools, such as RRSPs and tax-free savings accounts, to meet their retirement savings goals.

“This is a really good opportunity,” she adds, “for the financial services industry to provide some really interesting and innovative solutions that won’t necessarily require the creation of one big plan for all. Let’s leverage what we already have in place.”

The IIAC supports other recommendations in the Senate report, such as a proposal to permit contributions to RRSPs to be made until age 75 rather than age 71, at which point they have to be converted to registered retirement income funds or annuities.

In addition, says Taylor, the report’s proposal to establish lifetime inflation-adjusted contribution room of $100,000 in TFSAs — in addition to the existing annual contribution room — would provide Canadians with more flexibility in accumulating savings.

The Investment Funds Insti-tute of Canada also has expressed support for the proposed changes to RRSPs and TFSAs.

As another initiative to increase savings, the report urges the government to encourage multi-employer pension plans, including RRSP arrangements.

Many industry groups have advocated greater use of MEPPs.

“There seems to be a Canadian consensus building around the opportunities that MEPPs provide for Canadians to save more effectively in the workplace,” says Frank Swedlove, president of the Canadian Life and Health Insurance Association Inc. , which welcomes the recommendation.

The Senate report addresses the positive contribution that financial advisors make in helping Canadians save for retirement. But the report expresses concerns over conflicts of interest that can arise in client/advi-sor relationships.

To address this issue, the report urges the government to expand the mandate of the Financial Consumer Agency of Canada to include monitoring and overseeing the conduct of investment advisors and managers, conflicts of interest in their relationships with clients, the fees they charge and the relationship between fees and investment performance. IE