As many advisors are preparing to weigh the impacts of the Ontario Retirement Pension Plan on their clients' financial outlook, the Investment Funds Industry of Canada (IFIC) believe that the plan should be scrapped altogether.
IFIC is arguing that a Pooled Registered Pension Plan (PRPP) is better equipped to address the gaps in Ontario’s retirement savings framework and said the proposed plan could avoid negative consequences that are inevitable to several industries, small to medium-sized business.
“Ontario’s proposed PRPP framework follows the federal voluntary model; however, as other provinces have demonstrated, PRPPs easily can be easily adapted to achieve provincial public policy goals,” said CEO Joanne De Laurentiis, IFIC CEO and president.
“A well-constructed PRPP framework could directly address real gaps in retirement savings options currently available to employers and employees while avoiding the potential negative consequences posed by the ORPP.”
The President’s comments come at a time when advisors are figuring out the impact the new ORPP plan will have on their finances, their quest to save for retirement and similar endeavours.
“This is going to be another element. Advisors need to educate their clients, will it be enough? This is also about preparing them for the inevitable hit it will put on their cash flow,” says one Toronto-based advisor in an interview with WP.
“This is going to reduce your capacity to save outside of these plans and that’s why advisors need to be aware of the fact that their clients are going to see less money on their regular pay. It could impact the plans they’ve set up.”
The proposed plan would seek to enhance: a mandatory requirement that employers with a minimum number of employees offer a recognized retirement savings plan; employers having the ability to auto-enroll employees with reasonable opt-out provisions, and locking-in of employer contributions (with limited employee contribution withdrawal options).
Whether the government considers this as a viable alternative to their original plan is one story but the effect it’s having on advisors is another. With broad measures announced, it’s up to advisors to give their clients, especially business owners, a scope at the proposed pension plan.
“I get what the IFIC is trying to do. Everyone loves choice and that’s key, but I can’t see the government backing down,” the advisor said.
“For advisors, it’s a wait and see approach. It’s definitely something we’re thinking about and getting as much information to clients as we can is about all we can do. This will certainly have an impact on our clients, but the (provincial) government has all the power here.”