Financial industry associations are heralding efforts to help seniors maintain their retirement funds and Canadians increase their tax-free savings, as announced in Tuesday’s federal budget.
The Conference for Advanced Life Underwriting (CALU) and the Investment Funds Institute of Canada (IFIC), both in Toronto, are complimenting the proposed changes to withdrawal rules for registered retirement income funds (RRIF). These have not been altered since 1992.
New rules would allow account holders to withdraw less from those funds. For instance, a senior would be required to withdraw 5.28% of his or her RRIF at age 71, down from 7.38% today.
See: Ottawa makes significant changes to RRIFs
“The RRIF minimum withdrawal rules haven’t kept up with changes in life expectancy and interest rates,” says Clay Gillespie, CALU board member. “At a time when so many Canadians are deeply worried about outliving their personal savings, it’s reassuring to know the government is taking positive action to help seniors make their retirement savings last longer.”
Canada’s population is aging at a faster rate than many predicted when the existing RRIF rules were enacted and the industry has supported revising these rules for some time, notes Joanne De Laurentiis, president and CEO, IFIC.
IFIC is also happy the federal government wants to maintain a 2011 election promise by proposing to almost double the annual maximum contribution limit for tax-free savings accounts (TFSA) to $10,000.
As registered retirement savings plans (RRSP) are not appropriate or available to everyone, TFSAs are an important alternative, says De Laurentiis, especially those on lower incomes and retirees.
The Canadian Life and Health Insurance Industry (CLHIA), in Ottawa, is touting health initiatives such as the home accessibility tax credit to help seniors and disabled Canadians make renovations to their home to help improve their mobility. These could include the purchase and installation of wheelchair ramps and walk-in bathtubs.
CHLIA is also welcoming renewed support for the Canadian Mental Health Commission and the proposed $14-million boost to the Canadian Foundation for Healthcare Improvement, which would be meant to support the foundation’s work in identifying savings and efficiencies in the health system.
One item that IFIC would have liked to see in yesterday’s budget is a move to develop group RRSPs so they would be more similar to pooled registered pension plans (PRPPs). These changes would include permitting the automatic enrollment of employees into group RRSPs, with reasonable opt-out provisions, and the locking in of employer contributions.
“As the federal government looks for ways to help Canadians save more for retirement, we will continue to press for the changes to group RRSP rules we proposed,” says De Laurentiis.