The Canadian Federation of Independent Business (CFIB) is calling on upper tiers of government to implement voluntary Pooled Registered Pension Plans, arguing that the economy cannot afford a hike in Canada Pension Plan (CPP) premiums.
“While we know some provinces are holding out for a CPP expansion, this is blocking progress to add an important retirement savings option for employees and owners of small businesses,” said Dan Kelly, CFIB president and CEO.
“Entrepreneurs can’t afford an across-the-board CPP premium hike, but many are interested in offering a pooled pension in their workplace.”
The CFIB is making its pitch in advance of a December 17 meeting of federal, provincial and territorial finance ministers. The organization had previously sent a letter to provincial finance ministers, urging them to introduce enabling legislation to implement the federal Pooled Registered Pension Pan Act. In some cases, the CFIB asked ministers to reconsider decisions to make PRPPs conditional on a CPP rate increase.
“As nearly 80% of small business owners do not have retirement plans in place for themselves or their employees, pooled pensions are just too important to be used as a political football,” Kelly said.
The CFIB said it supports the plans because “they offer lower fees than current retirement tools, reduce the administrative burden and exempt employer contributions from payroll taxes.”
A recent C.D. Howe Institute analysis of PRPPs argued that the savings vehicles are simply Registered Retirement Savings Plans (RRSPs) “with a new coat of paint.” It argues that, unless PRPP taxation rules are changed, lower and middle-income workers will do better to avoid the savings vehicles and instead save for retirement through Tax-Free Savings Accounts, to avoid a tax “clawback” on PRPP withdrawals.