Flaherty’s Inferior Pension Plan (FLIPP)
Here are the CLC’s Q and As re proposed Pooled Registered Pension Plans.
Basically they are like group RRSPs, but sponsored by a financial institution with a fiduciary responsibility as opposed to an employer. They may be somewhat lower cost than individual RRSPs, as with current group RRSPs. However, there will be a lot of such plans, with different investment options, so large economies of scale will not be reached.
Unlike the CPP, there is no mandatory employer contribution; no defined benefit based on career average earnings; no inflation protection,; and no assurance of full portability.Â Costs, including financial institution profits, will lower returns considerably compared to the CPP alternative.
Would such plansÂ gain a lot of members? Enrollment of employees could be mandatory, at the discretion of a province, but almost certainly with an opt out provision.Â Some individual RRSP accounts could be transferred to new, larger pools.
At best, a very poor alternative to CPP expansion.
Why are we getting this instead of CPP expansion?
The excuse is that CPP expansion should await better economic times – even though a CPP premium increase would be phased in only slowly, and not for a couple of years pending approval by the federal government and the provinces.
The reality is that CFIB opposition to an increase in mandatory employer contributions, plus financial insurance insistence on a private plan, have temporarily trumped advocacy for an expanded CPP.
Still, seven provinces favour CPP expansion, and the issue is not going to go away.