DC plans and RRSPs will not provide adequate retirement income

Many of the DC plans and RRSPs available to Canadians 'will not contribute meaningfully to an adequate retirement income'

Toronto (08 May 2008) – Many of the defined contribution (DC) pension plans and/or RRSPs plans available to Canadians “will not contribute meaningfully to an adequate retirement income”, according to report released yesterday by the Association of Canadian Pension Management (ACPM).

The report, Delivering the Potential of DC Retirement Savings Plans, notes that only 25 per cent of people working for private employers have a registered pension plan of any sort, and employers "seem increasingly reluctant" to offer even defined contribution plans, instead favouring group registered retirement savings plans or no plans at all.

"The ACPM believes that this lack of coverage is not in the public good as an employee whose employer chooses not to offer a retirement savings plan is forced to rely on his/her own skill set and motivation for retirement savings," the study says. "In addition, he/she loses the 'group' benefits of an employer-sponsored retirement savings plan, including typically lower costs."

The study says defined-contribution plans, which carry no retirement benefit guarantee, should nonetheless have specified target income goals, with automatic payroll deductions, higher contribution limits, and a focus on minimizing fees. It also suggests encouraging multi-employer plans and the creation of new retirement income products.

The ACPM report reveals the need for a comprehensive and balanced analysis of retirement saving plans in Canada. It identifies a lack of coverage, adequacy of retirement income, and availability of retirement income alternatives as areas in need of improvement.

The report presents a number of recommendations which ACPM believes that if followed, will result in a stronger and more effective retirement savings plans and an environment in which plan sponsors will be encouraged to maintain existing plans and establish new ones.

"Many of the recommendations in this Report can be implemented under the current legislative regime", commented Scott Perkin, President of ACPM. "However, other recommendations will require changes to the regulatory scheme. We are therefore urging governments to consider the recommendations in this report and to make the appropriate changes."

ACPM is the voice of Canadian pension plan sponsors, administrators and their allied service providers. Established in 1976, ACPM advocates for an effective and sustainable Canadian retirement income system through a non-profit organization supported by a growing membership and a team of volunteer experts. ACPM currently has 570 Individual Members and 23 Institutional Members across Canada, representing more than 300 pension plans with assets of over $300 billion and over 3 million plan members.


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