Waterloo – As Finance Ministers prepare to meet in Vancouver to continue discussions on improving Canada’s retirement savings system, provincial governments have an opportunity to help increase access to workplace retirement savings plans for millions of Canadians.
“The federal government’s PRPP legislation is a big step towards improving the options many Canadians have to save for retirement and we are hopeful it will be passed by the House of Commons,” noted Sue Reibel, Senior Vice President of Manulife Financial’s Group Retirement Solutions. “Governments have already put a lot of thought, effort and consultation into establishing their PRPP framework. Next week’s finance minister’s meeting is another important step towards increasing access to workplace retirement savings for millions of Canadians.”
Pension and employment standards fall largely into provincial jurisdiction, meaning each provincial government will need to determine how PRPPs are implemented and managed.
“The decisions provincial governments make about how to implement and manage PRPPs within their own jurisdiction will be just as important as the details of the federal government’s legislation,” Ms. Reibel added.
Small and medium-sized businesses to play key role in PRPPs
According to Industry Canada, in 2010 almost 6.8 million Canadians were employed by small and medium-sized businesses, representing 64% of the total private sector labour force in Canada.1 In addition, small and medium sized businesses continue to grow at a faster rate than larger companies, making them an incredibly important economic engine and source of jobs within Canada.
Still, administrative costs and regulatory complexity keep most of these businesses from being in a position to offer a pension plan for their employees.
Manulife Financial’s Small Business Research Report (June 2011 survey of 1,005 small business owners and senior managers) found almost half of small business owners have considered offering a group RRSP (47%) or employee pension plan (49%), yet less than 1 in 5 indicated they actually offer these retirement savings options to their employees.
“For the first time in Canada’s history, PRPPs will allow millions of Canadians who work for small or medium-sized businesses to have access to a workplace pension plan to help them save for retirement,” said Ms. Reibel. “Access to this kind of retirement savings plan will allow small business owners to take care of their employees the way we know they want to, while at the same time attracting new talent and retaining many of their best employees."
Under the PRPP system currently proposed, employers would not be obligated to contribute to the PRPP; however, employers who do contribute will retain the flexibility to change contribution levels. A simple process plus a cost-effective model will be central to the successful implementation of PRPPs.
“Small and medium sized business owners will play a vital role in implementing PRPPs and we need to make sure governments design them in a way that won’t over-burden business owners with additional costs or administrative requirements,” said Ms. Reibel. “PRPPs target cost-efficiency and ease of implementation while achieving the goal of increasing Canadians’ access to workplace retirement savings plans.”
Millions of Canadians currently without a workplace retirement savings plan
Out of Canada’s total labour force of approximately 17 million people, the Canadian Life and Health Insurance Association (CLHIA) estimates 8.1 million Canadians have access to some form of a workplace retirement savings plan (5 million have access to a defined benefit plan, 1.1 million have access to a defined contribution plan and 2 million have access to group RRSPs).
“That leaves a considerable number of people without access to a workplace retirement savings plan,” concluded Ms. Reibel, “This limited access for millions of Canadians is particularly worrisome because so many of us are approaching retirement age. If the provinces take the opportunity to build on the federal government’s PRPP legislation and focus on ease and efficiency – millions of Canadians will find themselves on much stronger financial footing a decade or two down the road.”
About the Manulife Financial Small Business Research Report
The Manulife Financial Small Business Research Report is based on on-line research conducted by Rogers Connect Market Research (Rogers Publishing Limited) on behalf of Manulife Financial. In June 2011, Rogers surveyed 1,005 Canadian small business owners and senior managers (with between 2 and 100 employees) across industry sectors and regions about the key challenges they face in managing and growing their companies. The report also includes analysis from a selection of small business benefits advisors in Canada on what the research results mean for those who support small business. A full copy of the report can be downloaded at smallbizadvisorweek.ca.
About Manulife Financial
Manulife Financial is a leading Canada-based financial services group operating in 21 countries and territories worldwide. For more than 120 years, clients have looked to Manulife for strong, reliable, trustworthy and forward-thinking solutions for their most significant financial decisions. Our international network of employees, agents and distribution partners offers financial protection and wealth management products and services to millions of clients. We provide asset management services to institutional customers worldwide as well as reinsurance solutions, specializing in property and casualty retrocession. Funds under management by Manulife Financial and its subsidiaries were C$492billion (US$473 billion) as at September 30, 2011. The Company operates as Manulife Financial in Canada and Asia and primarily as John Hancock in the United States.
Manulife Financial Corporation trades as ‘MFC’ on the TSX, NYSE and PSE, and under ‘945’ on the SEHK. Manulife Financial can be found on the Internet at manulife.com.
AVP, Media Relations
Manulife Financial Canadian Division
1 Industry Canada, “Key Small Business Statistics – July 2011,”