July 18, 2011
Archived - Speech by the Honourable Ted Menzies, Minister of State (Finance), Delivered at Swiss Master Chocolatier
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In the last election, Canadians gave us a strong mandate to continue advancing our Economic Action Plan.
Since the Plan was introduced in 2009, Canada’s economy has been spared the worst of the global recession and has remained on the right track.
About 590,000 more Canadians are working today than in July 2009, the best record in the G7.
We have experienced 7 straight quarters of economic growth and the IMF forecasts that Canada’s economic growth will continue to be one of the strongest among G-7 countries this year and next.
Canadians can be assured that, in our new mandate, we will continue to keep our focus squarely on the economy – and keeping it on the right track.
Indeed, Canada’s Economic Action Plan is entering its next phase, A Low-Tax Plan for Jobs and Growth.
This phase represents our continued efforts to create the right conditions for more long-term jobs and stronger economic growth, all the while steadily eliminating the deficit and returning to surplus.
It also focuses on ensuring that families, seniors, and everyday Canadians have enough money saved when they retire.
All Canadians want and expect their government to focus on ensuring the long-term strength of Canada’s retirement income system.
And trust me … this government has been working hard on that.
Our latest action is a major initiative that will really benefit many Canadians that don’t have the same security of work pension as others - Pooled Registered Pension Plans, or PRPPs.
What are PRPPs you ask?
PRPPs are a new kind of defined contribution pension plan that will be available to employers, employees and the self-employed.
PRPPs will play a critical role in improving the range of retirement options available to Canadians by providing a low cost retirement savings option vehicle.
This is especially important to small business and its employees who will now have access to a low cost private pension plan for the very first time.
Because many small business employees and employers will “pool” their pensions a lower management cost will be achieved. People like you will be buying bulk.
It is an idea whose time has come and I am happy to be able to go to every province and territory in this country and talk about the need for retirement savings and what your government is doing to help you meet your retirement goals.
In short, PRPPs will be efficiently managed, privately administered pension arrangements that will provide greater choice to employers and individuals, thereby promoting pension coverage and retirement saving.
And that is also why federal, provincial and territorial governments are working to implement PRPPs as soon as possible.
As I mentioned, PRPPs are the latest in a series of important steps your government has taken to strengthen Canada’s retirement income system.
While this system is already recognized around the world by experts like the Organisation for Economic Co-operation and Development (OECD) as a model that succeeds in reducing poverty among seniors and in providing high levels of income replacement to seniors. We recognise, however, that we can always do more.
That is why we have already made a number of targeted improvements to this system:
- In 2009 we introduced changes to the framework for federally regulated pensions. I went coast to coast and consulted with Canadians about these pensions and what improvements we could make. The feedback we received was tremendous and resulted in many reforms. Reforms like, ensuring that an employer fully fund benefits if the pension plan is terminated.
- We introduced the Tax-Free Savings Account, which is widely acknowledged to be the most significant private savings investment vehicle since the introduction of the RRSP.
- And just recently, Budget 2011 announced a new GIS top-up benefit for the most vulnerable seniors. Seniors with little or no income other than OAS and GIS will receive additional annual benefits of up to $600 for single seniors and $840 for couples. This measure will further improve the financial security and well-being of more than 680,000 seniors across Canada and is the most significant increase to the GIs in 25 years.
All told we provided $2.3 billion in additional targeted tax relief to seniors and pensioners this fiscal year—measures like pension income splitting, increases in the Age Credit amount, and a doubling of the maximum amount of income eligible for the Pension Income Credit.
Where does the PRPP fit in?
The answer to that takes us back to May of 2009 when Canada’s finance ministers set up a joint federal-provincial research working group to conduct an in-depth examination of the retirement income system in Canada.
I was honoured to serve as its Chair.
And we were all fortunate to have Professor Jack Mintz of the University of Calgary, one of Canada's leading economists and an expert in the field, as the working group’s Research Director. He also helped author a report on this study.
The report found that some modest and middle-income individuals may be achieving a lower overall income replacement rate.
With these findings in hand, we worked collaboratively to analyze the wide range of ideas that had been put forward to effectively address the shortcomings identified in the research report.
The results of this exhaustive research effort and extensive consultations with Canadians led to Finance Ministers agreeing upon a framework for PRPPs in late 2010.
Canada’s finance ministers opted to prioritize the PRPP framework over other options because it was considered the most effective and targeted way to address the prime areas for improvement identified in our working group’s research.
Let me just conclude by saying that although PRPPs represent a major step forward in securing Canadians retirement income needs, our work on the retirement income system is ongoing. So this is the beginning of another cross country trip for me -- this time to consult with Canadians on the best way forward for PRPPs.
Your government has acted to help Canadians weather the economic storm and, though the economic recovery remains fragile, we are acting to provide greater options for Canadians saving for retirement. It is never too soon to start saving. Thank you all for your time.