The Investment Industry Association of Canada is pleased Canada’s finance ministers reached an agreement on amending the Canada Pension Plan (CPP) to address the national retirement savings shortfall at their meeting in Vancouver on June 20, 2016. This decision will avoid a patchwork of provincial solutions, like the ORPP, that would require significant up-front costs; treat Canadians differently across the regions; limit pension portability; and result in less efficient and more costly solutions to the narrowly identified savings problem.
The CPP reforms provide a uniform solution to boost savings for all Canadians. However, a targeted approach of selective adjustments to the existing tax-assisted retirement savings programs, implemented in concert with the CPP reforms, could gear increased retirement savings to certain Canadians needing to build savings. For example, Canadians wanting to continue working beyond the statutory retirement age should have access to RRSP accounts beyond age 71; RRIF withdrawal rules should be more flexible to bolster savings for elderly Canadians; and incentives such as the deductibility of Group RRSP contributions against pay-roll taxes create an incentive for small businesses to offer lower income Canadians these popular workplace pensions.