The Portfolio Management Association of Canada (“PMAC”), through its Industry, Regulation & Tax Committee, is pleased to have the opportunity to participate in the consultation process (the “Consultation Paper”) regarding the proposal for an Ontario Retirement Pension Plan (“ORPP”).
We support proposals that are aimed at strengthening our retirement income system. As we have stated in previous pension consultations both provincially and federally, we believe in the importance of balancing government responsibility for retirement savings with individual responsibility and believe that the proposed ORPP tips the scale irresponsibly to the burden resting with government and sends the wrong message to Ontario residents most of whom already demonstrate through personal contributions to RRSPs and TFSAs, acceptance of the fundamental responsibility for ensuring adequate personal savings.
The ORPP is not coordinated with other retirement savings initiatives in Canada. It would be detrimental to small and medium sized businesses in Ontario, at a time where Ontario needs to be the engine of growth in Canada. Given that 47% of Ontario registered plans are Defined Contribution (DC) plans, the ORPP is punitive to these employers who have invested in setting up very effective, well designed DC or group RRSP programs for their employees who will now have to contribute over and above what they already have committed to as part of their employee benefits or collective bargaining arrangements. ORPP also duplicates the policy objectives of the broader PRPP legislation in place in other provinces and does so in a fashion that diminishes the concept of personal responsibility towards retirement. Ultimately, as an advocate for flexible retirement savings and low cost options, we prefer a retirement savings landscape that offers multiple options for investors with flexible features such as transferability and portability embedded in the plan. As a result, for these reasons and others detailed below, we do not support the proposed ORPP.
As a more viable alternative, Pooled Registered Pension Plans (PRPPs) would be sufficient to fill the gap for Canadians that are not in an employer sponsored retirement savings or pension program. We recommend the Ontario government continue to focus on and move forward quickly with PRPPs, which are low cost and administratively-simple pension plans that will help employers, their employees and the self-employed to save more for retirement.
Similarly, the Target Benefit Plan Framework (TBP) provides another opportunity to address retirement savings options. PMAC is supportive of the Federal TBP Framework and believe the TBP Framework provides a workable alternative to current plan options (Defined Benefit (DB) and DC plans) and provides a more long term sustainable option for retirement savings that provinces should move forward with. Both PRPPs and the TBP offer savings options to all Canadians and would increase workplace plan coverage in Ontario.
Given the Ontario government’s original policy preference was to enhance CPP, and an upcoming Federal election in the Fall, it may be prudent to delay ORPP implementation with the hopes of reopening the CPP debate.