Mr. Chair, members of the committee, I am very pleased to have the opportunity to be here today on behalf of the Canadian Life and Health Insurance Association. We welcome the opportunity to share our views with the committee as part of your pre-budget deliberations.
The CLHIA is a voluntary organization whose member companies account for 99% of Canada's life and health insurance business. The industry provides a wide range of financial security products such as life insurance, annuities and supplementary health insurance to about 26 million Canadians. Also, over two-thirds of Canada's pension plans, primarily defined contribution plans for small and medium-sized businesses, are administered by Canada's life and health insurance industry.
I will focus most of my remarks today on the implementation of Pooled Registered Pension Plans, or PRPPs, and their benefits to Canadian workers.
But I first want to touch briefly on a tax matter that we raised in our pre-budget submission.
We strongly urge government to adopt a comprehensive group taxation regime. To attract more head offices and investment, taxation of corporate groups needs to be competitive with major developed countries around the world. Canada is the only G-8 country that does not have a statutory group tax relief mechanism.
Moving on to the pooled registered pension plans, we were pleased to see the statement from the Honourable Minister of State for Finance last week that he hopes to introduce legislation by the end of the year to implement PRPPs. However, if this does not occur, we would ask that the Minister of Finance take steps to introduce the necessary legislation in his next budget.
PRPPs offer an excellent opportunity to improve the retirement saving prospects for millions of Canadians. PRPPs will build on the successful defined contribution model by pooling many employees together in a plan offered and administered by regulated financial institutions. PRPPs will be attractive to small and mid-sized employers as well as the self-employed, and they will be available at a cost usually only realized by the very largest pension plans.
To be successful and to maintain low costs, it will be important to get the structure right. PRPPs will need to be simple, consistent across the country, and they will need to promote participation and growth of retirement savings.
To get Canadians started on a retirement savings plan in the first place, we recommend two provisions. The first involves auto-enrollment. When an employer offers a plan, employees would be told about it, and unless they choose to opt out they would be enrolled 60 days later and payroll deductions would begin. The second provision would be to require that all employers at least offer some form of workplace retirement plan. This would not require employer contributions, recognizing this might present a hardship for some employers, particularly in this economy; it would simply require that they facilitate a plan in the workplace.
We estimate that without these provisions, 175,000 Canadian workers could be enrolled in a PRPP. With auto-enrollment only, that number would rise to about 750,000. With auto-enrollment and a requirement that employers offer a plan, almost three million Canadians could be enrolled and saving for retirement.
We believe this is a wonderful opportunity that should not be missed. To get there we recommend that a framework be established for PRPPs that requires auto-enrollment of employees and that can be adopted by provinces and territories.
We recommend changes to the Income Tax Act to remove the requirement for an employment relationship between pension plan members and the plan sponsor. This would allow for pooled plans where there isn't a common employer and for plans administered by a financial institution.
We also recommend changes in the Income Tax Act to use a hybrid administrative regime for PRPPs that provides pension protection for spouses and common-law partners on death or marital breakdown. It would be locked in to provide retirement income but would also use the Income Tax Act's simpler RRSP contribution rules to reduce the administrative burden. These recommendations can be found in our August 2011 submission to the finance department.
Thank you again Mr. Chair for the opportunity to appear before the committee today. I would be pleased to provide any further input that the committee would find useful and answer any questions from the members of the committee.
Thank you very much.