Whatever happened to pooled pension plans?
It certainly has a bold, dramatic ring to it: the Red Tape Reduction Action Plan.
That's the name for the recently announced federal program designed to streamline the 2,600 regulations that affect the small business sector. It's part of an ongoing campaign to make life (and voting Conservative) easier for small business owners, who now contribute 45 per cent of Canada's GDP and generate over half the jobs in Canada.
The rationale behind these moves is the result of one thing: a hard-won understanding that the interests of small business owners need to be better reflected in both the design and delivery of government policies. After all, while large multi-national corporations responded to the global economic downturn by hoarding capital and trimming Canadian jobs, it was the small business sector that continued to invest and create them.
(There's also the political reality that these smaller ventures are based and have deep roots in large and small communities across Canada — which means that what makes them and their employees happy can make or break a government.)
So, when Ottawa decided to address the issue of pensions and retirement savings for the 60 per cent of Canadians who have no workplace pension or retirement payroll deductions — most of whom own or work in a small businesses — limiting administrative and regulatory hassles was a priority.
According to survey results gathered by the Canadian Federation of Independent Business (CFIB), a full 78 per cent of small business owners do not offer any type of retirement savings plan for their workers. Half of those surveyed indicated they can't afford to offer pension-related benefits and one-third said it was too complicated from an administrative standpoint and the cost of the required paperwork was prohibitive.
At a time of record household debt and meagre personal savings, it's not exactly the best way for a large segment of a rapidly aging population to be positioned. (The same rationale inspired the creation of the Tax Free Savings Accounts a few years back.)
That's the back story behind the development of the federal Pooled Registered Pension Plans (PRPP) legislation that was delivered late last year in the form of Bill C-25.
But although the need clearly exists and the CFIB supports the new initiative, PRPPs have yet to be ratified and regulated by provincial governments.
On the surface, the whole thing should be a no-brainer. After all, one of the singular features of a PRPP is the practical, underlying assumption of achieving economies of scale — including leverage of existing infrastructure. A licensed third-party institution is expected to independently administer the retirement savings plan for employees from a number of small businesses at "low cost."