Who will win the battle for your pension bucks?

Do Canadians still favour a Canada Pension Plan enhancement, or do they support Finance Minister Flaherty’s proposal for Pooled Registered Pension Plans?

Well, it depends who you ask.

A survey released by the Canadian Life and Health Insurance Association in late February showed that 90 per cent of Canadians polled support the federal government’s proposal for employers to have better access to pension plans through PRPPs which would be administered by registered financial institutions (e.g., members of the CLHIA)

The CLHIA press release also notes that Canadians recognize the value of the CPP in the overall retirement system (with 55 per cent supporting some government role), but they want to have choice in their investments and believe the private sector provides that choice. Only 13 per cent of the 1000 people surveyed online in early February by the CLHIA said they want to leave their retirement savings completely with a public plan.

Yet in the same month, the Canada Labour Congress representing 3.2 million Canadian workers launched a major campaign of radio advertisements promoting CPP improvements. According to CLC president Ken Georgetti, most provincial governments and pension experts agree that expanding CPP is the best way to guarantee retirement security for Canadians.

“But the federal government thinks it knows better. It wants to start new group RRSPs run by the financial industry. That will be good for banks and insurance companies and bad for the rest of us. They will charge us fat fees to manage our money. That costs us a lot and leaves us with less when we retire. It’s a rip-off,” Georgetti said.

So who is right?

In a March 1st newsletter, pension guru Keith Ambachtsheer acknowledges the financial services industry is keen to help Canadians save more for retirement, but he says that help typically comes at a high price in the form of various kinds of fees.

He believes PRPPs could work, but only if they are “properly designed and implemented.” To ensure Canadians can accumulate an acceptable level of retirement savings, he says PRPPs should have the following three critical features:

1. Auto-enrollment: Mandatory participation with an opt-out. U.S. research reveals participation in 401K plans (like RRSPs) increase dramatically with auto-enrollment.

2. A well-designed default option: Well-designed default options with respect to the contribution rate, investment policy, post-work decumulation policy and cost effectiveness for the majority of plan members who “choose not to choose.”

3. Independent, expert oversight: Independent, expert oversight that encompasses both the initial PRPP approval and ongoing value-for-dollars monitoring.

Ambachtsheer thinks the odds are 50-50 that the government and the private sectors will get it right. But the labour movement still believes that CPP is the best route to effective pension reform.

What do you think?