Thursday, July 21, 2011

Pooled RPPs Won’t Help Current Retirees

With the Canadian political parties squabbling over the Conservatives’ plans to reform pensions using Pooled Registered Pension Plans (PRPPs) rather than expanding CPP, a key factor that isn’t discussed much is that current retirees aren’t likely to get extra money each month.

Many groups have put forth suggestions for pension reform in recent years. Most of these suggestions have not included plans to give more money to current retirees, but usually this fact was not made clear. Those who are retired now or who will retire soon can be forgiven if they thought expanding CPP would mean they’d get more money in retirement.

With the Conservatives pushing defined contribution PRPPs, it should now be clear that you won’t get more money out in retirement unless you put more money in while working.


  1. Even if the CPP was expanded, it wouldn't affect current retirees.

  2. @Mike: It depends on which CPP expansion plans you're talking about, but it's true that the most credible plans did not involve giving more money to current retirees. However, try taking a poll of current retirees and you'll find that many thought they would get more money.

  3. I think your last paragraph says it all.

    The pension gap is significant but I think the PRPP is really about the future as opposed to 'the now'.

    In my experience in educating and planning with boomers through our workshop programs, a lot of boomers are going to be OK.

    I think the real issue is further ahead with the next generation who have lived solely in the consumer era and have debt, consumption an savings all wrong.

    The best thing that could happen is when it becomes culturally trendy to 'save money for retirement' just like it has become somewhat trendy to be frugal and use coupons again.

  4. @Jim: That's an interesting insight. I'm so used to hearing about boomers concerns about a bleak retirement that it's good to hear from your experience that they'll be OK without extra free money from younger people.

  5. I'm not counting on the government for anything. If I do get something, that's a bonus. They clearly have no long-term plan for an emerging demographic crisis.

    I've got about 20 years to get my act together, I hope that's enough.

  6. Not sure where all these boomers figured the excess money was going to come from, considering they represent the tidal wave of retirees. I know I don't want to pay any more than I already do into a plan that may not be around when I retire. I agree that the RPP idea (forced savings) is probably best to ensure the masses save for retirement.

  7. @My Own Advisor: I'm not too concerned about getting nothing out of CPP. It's possible that benefits will be trimmed in some way because of financial pressure, but I can't see it shut down entirely in 20 years unless we get hit by nukes.

    @Chris: It was my understanding that PRPPs are to be optional, but I may be mistaken.