Thank you, Shirley-Ann.
As Shirley-Ann mentioned, I am responsible for overseeing Manulife's group retirement business. At Manulife we provide employee benefit and retirement solutions to more than 20,000 businesses and about 3,500,000 Canadians. We support businesses with two employees and businesses with 40,000 employees.
I have spent a significant amount of time over the last year talking to business owners and their advisers about their retirement programs. In some cases they have decided not to offer such programs to their employees.
For the purposes of this discussion, there are a number of things we need to address through regulatory and legislative changes to, first, increase access to more businesses and encourage more businesses to offer workplace retirement programs and, second, once we have a program in place, to enhance participation and savings of the employees when a plan is there.
Let me begin with increasing access to employer-sponsored retirement programs. Most Canadians who do not have a workplace pension work for small and medium-sized businesses. These employers find pension rules difficult and costly, and instead look to group RRSPs, which are more flexible and easier to administer, and that's when they decide to offer a plan.
There are a number of obstacles in play that are preventing access to such plans. This can be addressed through two avenues. The first is to change the defined contribution pension regulations in 11 jurisdictions in Canada to simplify the regulations and allow for multi-employer pension plans; the second is to make changes to the Income Tax Act that will strengthen group RRSPs to give them more pension-like qualities. Using the existing RRSP framework, the Government of Canada could quickly and effectively, and with minimal cost, significantly improve existing plans and encourage more plans.
The changes to the Income Tax Act would include the following.
First, allow multi-employer plans within the group framework. This would reduce administrative and compliance costs and provide economies of scale.
Second, lock in employer contributions. Current group RRSPs do not legislatively restrict access to retirement savings. The ability of workers to access contributions, especially their employer contributions, makes group RRSPs unattractive to many business owners. It also makes employers hesitant to match employees' contributions.
Third, limit portability. While they continue to be employed by the sponsoring employer, employees should not be permitted to transfer their locked-in assets out of the plan. When employees switch employers or retire, they will have the option to transfer their group RRSP to one offered by their new employer, into a DC plan, or into another locked-in savings plan.
Finally, apply pension-like tax treatments to contributions and payouts. Unlike employer contributions to a pension plan, employer payments to a group RRSP attract EI and CPP. Employer contributions to a group RRSP should not attract either of these taxes. As well, payouts from a pension plan can be split between spouses at age 55; income received from an RRSP can only be split at age 65.
Once an employee has access to an employer-sponsored retirement program, there are a number of regulatory and legislative changes that will enhance participation and savings. The first is automatic enrolment for employees, with the ability to opt out, and allowing employers to re-enrol their employees at set intervals, thereby capturing employees whose personal circumstances have changed and who no longer wish or need to opt out. The second is to allow for auto-escalation of employee contributions; they will increase over time with either a pay raise or a promotion.
We believe these improvements will make the existing framework for employer-sponsored retirement savings plans stronger and create more flexibility for businesses.
Thank you.