Pooled Registered Pension Plans (PRPPs)
Pooled Registered Pension Plans (PRPP) Act was approved on June 28, 2012 in order to help Canadians save for retirement.
What differentiates the PRPP from other employer savings plans?
The PRPP is a pooled registered pension plan that offers employers lower fees than typical plans. This specifically allows small and medium sized companies to offer benefits that were once predominantly enjoyed by public sector and large firm employees. It will also be beneficial for the self employed.
What does this mean for Canadians?
The PRPP will allow more choice when it comes to retirement planning. Due to the low cost of entry and the ability to group funds amongst small and medium sized companies, the PRPP will encourage companies to offer group retirement benefits to their employees. According to the Honourable Ted Menzies, Minister of State (Finance), just over 60% of Canadians do not have a workplace pension plan. As a result, the goal of the PRPP is to make retirement planning more accessible.
Although the effects of the PRPP are yet to be felt, they have the potential to allow small companies to showcase themselves as an employer of choice. The PRPP will allow such companies to draw in top-notch employees through the ability to offer pension benefits. Furthermore, self employed individuals may also be greatly assisted in retirement planning. Many felt that a change was needed in the Canadian retirement landscape. The PRPP may become a vital part of that change.
So what now?
The obligation to set up a PRPP may come sooner than you think, so you may consider getting a head start on the competition by implementing a Group Registered Savings Plan and a group benefit plan now.