From Canada’s finance minister to the former chief actuary of the Canada Pension Plan, politicians and pension experts across the country have been hailing in recent months the importance of an expanded CPP.
Jean-Pierre Laporte, chief executive officer of Toronto-based Integris Pension Management Corp., may be forgiven if he says, “I told you so.”
Mr. Laporte, a former pension lawyer with Toronto firm Bennett Jones LLP, has been expounding for years on an expanded CPP. He wrote about it in 2004 for Benefits and Pensions Monitor magazine, and his ideas formed the basis in 2011 for the federal Liberals’ “secure retirement option for Canadians” plan.
Driven by his conviction that something needed to be done to address the expected shortfall in Canadians’ retirement incomes – especially Canadians without an employer-sponsored pension – Mr. Laporte quit his job two years ago and founded Integris Pension Management.
“I was a pension lawyer on Bay Street servicing very large public and private sector plans, and I realized there was no pension plan available for lawyers and for many other Canadians who don’t have access to an employer-sponsored pension plan,” says Mr. Laporte. “There I was, a pension lawyer without a pension plan – your typical story about the shoemaker whose kids go barefoot.
“I thought, there’s something wrong with this picture.”
Mr. Laporte, who had worked with pension organizations such as Ontario Teachers’ Pension Plan, began exploring the idea of a supplemental pension plan that could provide Canadians with retirement income in addition to their CPP benefits. His early research led him to individual pension plans, or IPPs, which are basically similar to the pension funds owned and administered by large employers and unions but made available to individuals with incorporated companies.
“But I discovered that while IPPs are amazing products, they had a lot of issues,” Mr. Laporte says. “One is a lack of flexibility; IPPs are a defined benefit plan and you have to keep making contributions even in bad times, which are not ideal for people with a cyclical business.”
IPPs are also complicated to set up and manage, requiring the services of an actuary, an investment manager and a custodian to hold the funds, says Mr. Laporte. A lot of IPPs also call for the appointment of three trustees, who would have legal and fiduciary obligations.
It’s a lot of work – and expense – for a small business owner or incorporated professional such as a doctor or dentist, says Mr. Laporte.
Drawing on his deep knowledge of the country’s complicated pension laws, Mr. Laporte set out to develop a product that, like IPPs, would give incorporated individuals such as entrepreneurs, health care professionals and, yes, lawyers access to a registered private pension plan, but one that would have none of the encumbrances of an IPP.
The result: a registered pension plan that is owned by the incorporated individual but is set up and administered by Integris. Everything that would typically be needed to create, administer and manage a registered pension plan – from actuarial services to fund management and trustee oversight – would be provided by Integris and its partners, which include Quebec City-based Industrial Alliance Insurance and Financial Services Inc., and Toronto’s Meridian Credit Union, one of the country’s largest credit unions.
“It’s totally turnkey,” says Mr. Laporte, who owns Integris together with three other shareholders, one of whom is Gavin Graham, former director of investments at BMO Asset Management, part of Bank of Montreal.
While there are some similarities between this product and an IPP – such as tax-deductible contributions – the Integris plan is not simply an IPP packaged with services, says Mr. Laporte.
He points to benefits offered by an Integris plan that are not available in an IPP, including the ability to switch each year from defined benefit to defined contribution, as well as lower management fees resulting from Integris’s ability to negotiate group discounts.
“We’re able to generate economies of scale, something you can’t do with an IPP because they’re retail products,” says Mr. Laporte. “With the Integris personal pension plan, what you essentially have is a private-sector version of large, well established plans such as OMERS (Ontario Municipal Employees Retirement System) and the Ontario Teachers’ Pension Plan, with all the best practices from these plans but designed to be accessible to individuals.”
Even with such a sound concept to build on, Mr. Laporte says creating a marketable registered personal pension plan kicked up more than a few challenges.
“We were dealing with intense conflicts of interest between potential partners that could help us distribute this,” says Mr. Laporte. “If you’re an investment adviser who has a relationship with a particular investment firm, you’re not likely to tell your client to take their money from the investment firm and put it in this registered personal pension plan held by another custodian – it’s not going to happen.”
To address this challenge, Mr. Laporte made the Integris plan open to any custodian. In addition to its current partners, any investment firm in Canada can sell an Integris pension plan to its clients.
The lack of information and knowledge in the investment industry about pensions in general also presents a challenge for Mr. Laporte and his team, which includes 13 employees.
“I think a lot of people aren’t getting what we’re offering, and some can’t even believe this type of pension plan is possible,” says Mr. Laporte. “But those who do get it almost invariably say they think it’s brilliant.”
Mr. Laporte says it’s too early to discuss revenue information for Integris. He points to the successes his company has achieved so far: an agreement with Industrial Alliance and a global recruitment firm to sell the Integris plan under their own brand, and a pilot project with Meridian Credit Union to identify members who would be eligible for the Integris plan.
“There are over 1.2 million Canadian professionals and business owners today who could have an individual pension plan and they don’t,” says Mr. Laporte. “We’re in undiscovered country with huge potential.”