Ian Russell President and Chief Executive Officer July 28, 2011 The Honourable Ted Menzies, P.C., M.P. Minister of State, Finance House of Commons Ottawa, Ontario K1A 0A6 Dear Minister: Re: Pooled Registered Pension Plans (PRPPs) ʹ Detailed Elaboration of Key Elements of the Proposed Framework dated June 24, 2011 (the Framework) The Investment Industry Association of Canada (IIAC) is writing to convey our continued ƐƵƉƉŽƌƚ ĨŽƌ ƚŚĞ ŐŽǀĞƌŶŵĞŶƚ͛Ɛ ĞĨĨŽƌƚƐ ƚŽ ŝŵƉƌŽǀĞ ƚŚĞ ƌĞƚŝƌĞŵĞŶƚ ƐĂǀŝŶŐƐ ŽĨ ĂŶĂĚŝans. We continue to believe that PRPPs can fill an identified gap in retirement savings options by providing small companies and self-employed Canadians with an alternative retirement savings vehicle that offers the potentiAl for economies of scale and lower costs. To achieve the policy goal of bolstering the retirement savings of Canadians, PRPPs should be designed to complement existing retirement savings plans (RPPs, RRSPs (including Group RRSPs), RRIFs, TFSAs). PRPPs should provide A real alternative retirement savings plan for Canadian employers unable to offer a defined benefit or defined contribution pension plan because of administrative costs, or a Group RRSP because of payroll taxes. PRPPs should not be designed as an incentive to encourage Canadians to shift their savings out of programs that are currently meeting their needs. 1 11 King Street West, Suite 1600, Toronto, ON M5H 4C7 Tel: 416-865-3036 Fax: 416-364-4861 [email protected] / www.iiAc.cA We are concerned that the original policy goal of PRPPs ʹ to provide an alternative vehicle for retirement savings of Canadians ʹ would be undermined by the exclusion of financial advice in an effort to offer Canadians a simplified uniform plan. The IIAC represents 180 investment dealers in Canada (both bank-owned and independent firms), that provide comprehensive investment services and advice to Canadians. Our members manage over $950 billion in investments, with almost a third invested in registered retirement plans through millions of accounts across the country. The success of the PRPP program will depend upon leveraging existing relationships between financial institutions and clients, and closing this avenue prematurely could reduce the effectiveness of the PRPP program. It also ƐĞĞŵƐ ƚŽ ƌƵŶ ĐŽƵŶƚĞƌ ƚŽ ƚŚĞ ƌĞĐŽŵŵĞŶĚĂƚŝŽŶƐ ŽĨ ƚŚĞ ĨĞĚĞƌĂů ŐŽǀĞƌŶŵĞŶƚ͛Ɛ dĂƐŬ &ŽƌĐĞ ŽŶ Financial Literacy, which identified the importance of qualified professionAl advice in helping Canadians to save more and make better financial choices. In consultations on the drAft Framework, our members recommended a PRPP program that is sufficiently flexible to take into account the profiles and needs of self-employed individuAls and small business owners who are the target PRPP market. The PRPP program proposed in the most recent version of the Framework does not provide this flexibility, because it discourages personalized advice And active investment. The PRPP model should embrace a range of investment approaches and functionality, including advice and discretionAry fund management, with costs that are reflective of the value and services provided, and fully trAnsparent to PRPP participants. PRPP administrators should not be restricted to certain segments of the financial sector, nor should mandated minimum costs be imposed under the PRPP Framework. Both conditions would restrict choice of investment products and services in PRPPs that would constrain the ability of the administrator to balance risk and return. This constraint could adversely impact portfolio return to the disadvantage of the plan member. As such, we respectfully recommend that you reconsider aspects of the Framework that limit the range and type of PRPP funds that can be offered, allowing more flexibility for financial institutions to offer PRPPs that include built-in advice and service components for employers and employees, and allowing PRPP participants to make choices based on their own needs and requirements. We are providing Department of Finance staff with a more detailed set of comments on the Framework, and on the proposed Tax Rules for PRPPs. Our comments on the tax rules focus on what should be done to ensure that those CanadiAns already saving in RRSPs, including Group RRSPs, are not disadvantaged ʹ especially if our members are unable to provide PRPPs to their 2 11 King Street West, Suite 1600, Toronto, ON M5H 4C7 Tel: 416-865-3036 Fax: 416-364-4861 [email protected] / www.iiAc.cA clients. This includes, but is not limited to, removing payroll taxes from employer and employee contributions, and allowing locking-in with respect to employer contributions, to Group RRSPs. We appreciate the opportunity to provide our feedback on the PRPP program and we look forward to further consultation on this matter. Yours sincerely, Ian Russell Cc: The Honourable Lloyd Snelgrove, M.L.A., Minister of Finance and Enterprise (Alberta) The Honourable Kevin Falcon, M.L.A., Minister of Finance (British Columbia) The Honourable Rosann Wowchuk, M.L.A., Minister of Finance (Manitoba) The Honourable BlAine Higgs, M.L.A., Minister of Finance (New Brunswick) The HonourAble Tom Marshall, M.H.A., Minister of Finance (Newfoundland And Labrador) The HonourAble J. Michael Miltenberger, M.L.A., Minister of FinAnce (Northwest Territories) The Honourable GrAham Steele, M.L.A., Minister of Finance (Nova ScotiA) The Honourable Keith Peterson, M.L.A., Minister of Finance (Nunavut) The Honourable Dwight Duncan, M.P.P., Minister of Finance (Ontario) The Honourable Wesley J. Sheridan, M.L.A., Minister of Finance (Prince Edward Island) The Honourable Raymond Bachand, M.N.A., Minister of Finance (Québec) The Honourable Ken Krawetz, M.L.A., Minister of Finance (Saskatchewan) The Honourable DArrell Pasloski, M.L.A., Premier And Minister of FinAnce (Yukon) 3 11 King Street West, Suite 1600, Toronto, ON M5H 4C7 Tel: 416-865-3036 Fax: 416-364-4861 [email protected] / www.iiAc.cA .