Canada’s retirement income system has already been recognized around the world as a model that succeeds in reducing poverty among Canadian seniors and in providing high levels of replacement income to retired workers.
But there are still improvements to be made to provide Canadians with the tools to make wise choices for their own financial security.
Incredibly, just over 60 per cent of Canadians do not have a workplace pension plan. In addition, some Canadians may be failing to take advantage of the savings opportunities offered to them through individual structures like RRSPs.
The recently introduced legislation on Pooled Registered Pension Plans (PRPP) marks a major milestone in our efforts to ensure the ongoing strength of Canada’s retirement income system.
PRPPs will allow many small business owners and their employees to have access to a large-scale, low-cost private pension plan for the very first time.
By pooling pension savings, PRPPs will offer Canadians greater purchasing power. Basically, Canadians will be able to buy in bulk. Achieving lower prices than would otherwise be available means they will get greater returns on their savings and more money will be left in their pockets when they retire.
The design of these plans will also be straightforward allowing for simple enrolment and management. Finally, they are intended to be largely harmonized from province to province –which also lowers administrative costs.
The PRPP framework was actually developed at a roundtable of Canada’s finance ministers in December 2010.
Indeed, Canada’s finance ministers opted to proceed with the PRPP framework precisely because it was considered the most effective and appropriate way to target those modest- and middle-income individuals who may not be saving enough for retirement – in particular, those who currently do not have access to an employer-sponsored Registered Pension Plan.
We are also working on additional measures to help Canadians maximize their retirement dollars.
We realize that Canadians need to have the tools and knowledge to make responsible financial decisions for their personal well-being and for the strength and stability of our financial system as a whole. To help further that goal, the Finance Minister’s office just recently announced it will appoint a Financial Literacy Leader to carry out activities in support of strengthening financial literacy.
And, working with the provinces, we also modernized the CPP, making it more flexible for those transitioning out of the work force, to better reflect the way Canadians currently live, work and retire.
Just recently, our latest budget also announced a new Guaranteed Income Supplement top-up benefit for Canada’s most vulnerable seniors. More than 680,000 low income seniors are now receiving additional annual benefits of up to $600 for single seniors and $840 for couples.
In addition, we have provided about $2.3 billion in additional annual targeted tax relief to seniors and pensioners through measures such as pension income splitting, increases in the Age Credit amount, and a doubling of the maximum amount of income eligible for the Pension Income Credit.
We are taking measures and developing tools to help people start saving earlier and make wiser spending decisions for their economic well-being throughout their life stages.