Use Existing Levers to Spark Higher Retirement Savings Levels: IFIC
Toronto, ON – September 9, 2015 – The Investment Funds Institute of Canada (IFIC) is urging the government of Canada to use its resources to encourage more Canadians to save through existing workplace and individual voluntary retirement saving plans, rather than to create yet another option.
“The problem for those at risk of under-saving is not a lack of access to voluntary savings opportunities, but rather under-utilization of existing retirement savings channels,” said Joanne De Laurentiis, president and CEO of IFIC.
In response to the federal government’s consultation on the creation of a voluntary pension plan, IFIC’s submission cites findings by McKinsey that those at risk of retiring with materially less disposable income than they had during their working years represent a small portion of Canadians (17%) and are largely working-age middle and upper-middle income households. The submission identifies a range of levers available to government to increase individual participation in existing workplace plans and to encourage more employers to offer a plan.
“Currently, participation in most workplace plans (other than defined benefit plans) is voluntary, making it easy for individuals who should participate to choose not to enrol,” said De Laurentiis. “As a starting point, the government could increase employee participation in existing defined contribution, group RRSP and TFSA plans by facilitating such proven behavioural techniques as auto-enrolment and auto-escalation. These measures should be augmented with targeted public awareness campaigns aimed specifically at ‘nudging’ those people most at risk of under-saving for retirement to save more,” De Laurentiis added.
IFIC’s submission calls on the federal government to make changes to the rules for group RRSPs and group TFSAs that would put them on a more pension-like footing by allowing employer contributions to be locked in and enable employer contributions to be exempted from payroll taxes, as is currently the case for defined benefit, defined contribution and defined target plans. It also proposes that the government could make it mandatory for every employer to offer a retirement savings program with locked-in features, while keeping employer matching contributions voluntary, as they are now, to avoid placing an undue financial burden on smaller employers.
The Investment Funds Institute of Canada is the voice of Canada’s investment funds industry. IFIC brings together 150 organizations, including fund managers, distributors and industry service organizations, to foster a strong, stable investment sector where investors can realize their financial goals. By connecting Canada’s savers to Canada’s economy, our industry contributes significantly to Canadian economic growth and job creation. The organization is proud to have served Canada’s mutual fund industry and its investors for more than 50 years.
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