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14 • The Columbia Valley Pioneer November 30, 2012
YOUR MONEY
Pooled Retirement Pension Plans?
It is widely recognized that the ideal retirement savings
plans in Canada are those which incorporate three components:
government programs like the Canada Pension Plan,
personal savings and workplace savings programs. According
to an Environics study conducted in 2010, only four
out of every 10 Canadians have a workplace savings plan.
These statistics, coupled with record low savings rates
among Canadians, have prompted the federal government
to pass Bill C-25, the Pooled Registered Pension Plans Act.
The object is to help replace some of the pension deficiency
in this country by providing a simplified, cost-effective pension
alternative to owners of small to mid-size companies,
which do not currently have a pension plan in place for
their employees.
The current pension landscape
The most desirable type of pension plan in Canada
is the defined benefit pension plan, which promises a
specific dollar amount payable monthly to a plan member
upon retirement at a certain age, usually for the
rest of their life. Other types of pension plans include
defined contribution or money purchase plans, both of
which do not promise specific income payments.
Defined benefit pension plans in Canada have
grown scarcer over time. In fact, those who enjoy these
types of pensions are generally current or former employees
of federal, provincial and municipal governments
or select large corporations.
Brendan Donahue
BCOMM, CIM, FCSI
Senior Investment
Advisor
Insurance Agent
Sara Worley
Investment Advisor
Insurance Agent
O ering the valley…
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Stocks, Bonds, GICs, Income Trusts, Preferred Shares, ETFs, Mutual Funds and more.
Accounts
RRSPs, RRIFs, TFSAs, LIRAs, RESPs,
Corporate Accounts, Cash Accounts
Services
Estate Planning, Financial Planning,
Insurance Planning, Retirement Planning
In recent years, many large corporations have scaled
back their pension offerings to new employees. This
decision is in direct response to increasing uncertainty of
the present and future ability to fund defined benefit pension
liabilities. According to a study published in 2010 by
the Certified General Accountants Association of Canada,
pension funding deficits climbed from $160 billion in 2003
to an estimated $350 billion in 2008.
These deficiencies in employer-sponsored pension
plans, coupled with the general lack of personal retirement
savings in Canada, are the factors which prompted the proposal
of Pooled Registered Pension Plans.
Structure
A Pooled Retirement Pension Plan would be offered
by various financial institutions, such as insurance or mutual
fund companies, known as administrators. Due to
pooling assets into specific investment products, the fees
would theoretically be lower than many traditional products.
Contributions would be made by the employee, the
employer, or both. Similar to a traditional pension plan, all
contributions, whether made by an employee or employer,
are deducted from the employee’s Registered Retirement
Savings Plan (RRSP) contribution room.
Advantages to employers
Participation in a Pooled Retirement Pension Plan may
be completely voluntary, depending on how each province
Selection
19 GIC Companies, 15 Insurance Companies,
100 Mutual Fund Companies
Research
TD Newcrest, Credit Suisse First Boston, First Energy
Capital Corp, MFC Global Investment Management
ultimately decides to implement the program. Due to their
proposed structure, if an employer decides to participate
in a Pooled Retirement Pension Plan, the often onerous
administrative duties associated with pension plans should
be greatly reduced compared with traditional offerings.
Bill C-25 also includes some financial sweeteners for
employers. Employer contributions will not be subject to
payroll taxes, and the contributions can be deducted from
an employee’s income as a salary expense for tax purposes.
Advantages to employees
Perhaps the biggest advantage to employees will
be that they will not be able to take money out of
their Pooled Retirement Pension Plans until retirement.
Current group RRSP plans set up by employers
for their employees can be accessed at any time by the
employee. Unfortunately for the future financial health
of the country, this happens far too often.
Outlook
Pooled Retirement Pension Plans have been met
with some criticism. Some opponents have indicated
that a pension system that is voluntary and marketdriven
is not a viable option, and that a better plan
would be to expand the Canada Pension Plan.
Others argue that there are enough defined benefit pensions
in the country that are already underfunded and there
is no need to put extra burden on the Canada Pension Plan.
Investments, Insurance
& Financial Planning
GIC Rates*
as of November 27 th .
1 year 1.90%
2 year 2.10%
3 year 2.25%
4 year 2.35%
5 year 2.50%
*Rates subject to change without notice.
Manulife Securities Incorporated is a Member of the Canadian Investor Protection Fund. Insurance products and services are o ered through Manulife Securities Insurance Agency (a licensed life insurance agency and a liate of
Manulife Securities) by Manulife Securities Advisors licensed as life agents. The Manufacturers Life Insurance Company is the sole issuer of the Manulife GIF Select insurance contract which o ers the IncomePlus bene t and the guarantor of any guarantee
provision therein.
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