Amid plans for beefing up the Canada Pension Plan (CPP), the rules for private retirement savings options also need to be tweaked to further improve retirement security, says the Investment Industry Association of Canada (IIAC) in a submission to the House of Commons Standing Committee on Finance as part of its consultations ahead of the next federal budget.

The planned improvements to the CPP will not, by themselves, address the savings deficiencies fully, particularly for younger taxpayers and workers approaching retirement, the IIAC’s submission says: “It’s critical that the benefits of the tax-assisted retirement savings program are adjusted to accommodate this changing pattern of retirement savings.”

Specifically, the industry trade association suggests that group RRSPs should be put on a level playing field with defined-contribution pensions and pooled registered pension plans (PRPPs) from a tax perspective.

“The IIAC recommends that the government relieve employers’ and employees’ contributions to group RRSPs from payroll tax, which will lead to higher savings for individuals using these plans,” the IIAC’s submission says.

In addition, given increasing life expectancies and low investment returns, the IIAC recommends that the age limit for contributing to RRSPs be raised beyond age 71 and that the rules mandating minimum yearly drawdowns from RRIFs be eliminated “to provide seniors with more flexibility and longer income tax deferral.”

In addition to its recommendations on enhancing retirement savings, the IIAC is reiterating its call for tax breaks to encourage investment in small- and mid-sized firms.

“Previous governments have failed to put in place an effective tax incentive to promote small business financings, and past decisions affecting the taxation of income trusts and the reduction in the annual contribution to TFSAs, have choked important financing vehicles for small business,” the IIAC’s submission says.

The IIAC recommends that the government introduce tax incentives modelled on the UK’s Enterprise Investment Scheme and Seed Enterprise Investment Scheme. The submission argues that these incentives “would be far more effective” than bringing back tax credits for Labour Sponsored Venture Capital Corporations (LSVCC) at enhancing venture investment, “as LSVCCs have a proven mediocre track record.”

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