Thank you, Mr. Chair, and my thanks to the committee for allowing me to appear before you today.
In a perfect world, we would be discussing modest increases in CPP and the PRPP. It's been said that politics is the art of the possible. The PRPP is possible, so let's deal with it.
The government has moved at breathtaking speed to strengthen the private leg of retirement savings. The TFSA, and now the PRPP, will give Canadians meaningful alternatives to save for retirement. If the PRPP does nothing more than reduce risk or reduce cost for retirement savings, it will be worthwhile.
The proposed PRPP could be viewed as a pooled RRSP offering lower-cost access to existing investment options, probably mainly mutual funds. Our experience with multi-employer plans suggests that it would be better for investors to share in that type of pooled retirement savings.
We're going to offer some thoughts on how we can make the PRPP more like a multi-employer plan.
Sponsors should have a legal obligation to serve the beneficiaries. There would be an obligation to include only investment options that meet the retirement purposes of the PRPP. It would seem inappropriate in a sponsored PRPP to allow the kind of “anything goes” investment options that RRSPs can include. Any investment options provided to members should fit a purpose within risk-reward objectives. The guidelines of the Canadian Institute of Actuaries for capital accumulation plans should apply. At the very least, we can hope investments will be more like those of insurance companies than RRSP mutual funds—bonds and their equivalents, rather than a reliance on stocks.
We think fiduciary duty is a critical idea and it should encompass no trailer fees. No proprietary product should be permitted unless it can be proven to be the best product for the plan. Plans should be subject to discretionary investing. Let the professionals make investment decisions, not individual investors. And if we call it pooled pensions, then let's deliver pensions.
Dealing with fiduciary duty will lower risk, but we have to deal with costs. Our canvass of existing pension plans leads us to believe that the upper limit should be 100 basis points, reduced to 50 basis points for plans approaching one billion dollars. Equally, there must be full transparency. There should be no benefit to plan sponsors as employers for offering a plan to employees. There should be a declaration of all ties between the trust and sponsor as well as a full declaration and report of all fees.
We think there should be, where possible, transportability of plans. Let's try to avoid stranding small pensions or, for that matter, other types of savings vehicles. Allow the transfer of a PRPP to a better pension where available or of a stranded pension to a PRPP. Let's promote some competition. Why don't we allow the transfer of RRSPs to a PRPP?
We also think it may be advantageous to allow existing entities that run multi-employer plans to offer PRPPs. From the Teamster's experience, it's not always possible to include company employees in those existing plans, but a PRPP alternative would be a better option than, say, matching RRSP contributions. This may allow existing MEPs to offer PRPP solutions where available.
No single solution will resolve the retirement savings issue. I think the PRPP proposal will move the ball closer to the goal line. Improving savings, reducing risk, and reducing costs is a winning formula. We think our suggestions will make this an even better product.
Thank you.
I welcome your questions.