Canada already has good retirement savings systems in place, but some necessary fixes to out-of-date and restrictive rules should be implemented to increase savings, says the Canadian Bankers Association in a report released Friday.

The report presents new research on Canadian household savings. It found that families save in many different ways depending on factors such as their stage in life and whether or not they have an employer-sponsored pension plan.

In light of these findings, the CBA cautions against rushing into a one-size-fits-all public approach, such as creating a new government pension plan, when it may not be the best solution and could duplicate existing private retirement savings and employer-sponsored pension programs.

“The banking industry believes that the retirement savings system in Canada is not broken, but it is in need of some urgent improvements,” says Nancy Hughes Anthony, President and CEO of the CBA.

“Why reinvent the wheel when it may be more effective for governments in Canada to work together to improve the private-sector, tax-assisted system that we already have?”

In the report, the CBA makes a number of recommendations about how the current retirement savings system could be improved. Among the recommendations are:

• Encouraging the development of multisponsor or third party plans open to a wider range of membership. The CBA says such plans could lower costs because of economies of scale, offer small and medium sized businesses effective alternatives to setting up their own plans, and be open to self-employed individuals.

• Increasing the age at which an RRSP must be closed out and taxing RRSP withdrawals at more favourable rates. Also, the report suggests a lifetime approach to tax-assisted retirement savings rather than an annual approach so that workers who have difficulty saving in certain periods of their lives can catch up when they are in a position to save more.

• Harmonizing pension laws across the federal and provincial jurisdictions would remove barriers for companies operating in more than one province when considering whether to offer pension plans to their employees.

The CBA report also points out the need for enhanced financial literacy as it relates to savings in general and retirement savings in particular.

“It is our belief that coordinated action by governments across Canada to modernize these retirement savings rules would strengthen the ability of the private sector to help Canadians save for their retirement,” says Hughes Anthony.

IE