Canada’s retirement income system is not in crisis, but could be strengthened by improving tax-assisted retirement savings programs and embracing the role of the private sector, the Investment Industry Association of Canada suggests.

In the IIAC’s submission to the federal government on retirement income system reforms, the association calls for the government to support the three-pillared approach to retirement savings reform that balances public and private responsibility.

“The current retirement income system generally works well for most Canadians by providing them with adequate replacement income upon retirement,” said Ian Russell, president and CEO of the IIAC. “However, the federal government should undertake further analysis to determine the appropriate public policy solutions required to assist Canadians in meeting their retirement income objectives.”

The association urges the government to avoid looking only at public sector solutions, and rather, to build on the strengths that already exist in the private sector. It notes that the wealth management sector provides Canadians with a wide selection of investment products, as well as investment advice that meets high standards of proficiency and care.

“Unlike large, homogeneous plans, the Canadian investment industry provides clients with customized plans based on the correct balance of portfolio return and risk tolerance,” the IIAC says.

It recommends several policy measures to strengthen the calibre of the retirement system, including more tax incentives for Canadians to invest for retirement.

“The removal of tax on investment returns will result in a faster accumulation of wealth for retirement,” the submission says.

In terms of tax-assisted savings programs, the IIAC recommends increasing RRSP contribution limits, increasing tax-free savings account contribution limits — or allowing retroactive deposits to these accounts — and increasing flexibility for retired Canadians to manage their RRIFs by removing minimum withdrawal requirements.

Another recommendation is for the government to develop a national strategy on financial literacy.

“The national Task Force on Financial Literacy created by the federal government is an important first step on the road to a more financially literate population in Canada,” said Russell.

The IIAC also calls for the government to maintain social programs. It notes that affordable health care in Canada is a key factor in ensuring that Canadians have adequate retirement income.

“The social safety net must remain in place for retiring Canadians in the future,” the IIAC says.

The association also calls for improved regulatory efficiency in the Canadian capital markets, which it says requires continued efforts to build a single securities regulator.

IE