The federal government should raise RRSP contribution limits, and eliminate RRIF withdrawal minimums, the Investment Industry Association of Canada’s (IIAC) recommends in its submission to the House of Commons Standing Committee on Finance 2015 pre-budget consultations.
The securities industry trade group calls for a handful of changes to bolster the retirement savings system, and help drive economic growth through increased small business investment.
On the retirement front, the IIAC recommends that the government make a handful of changes to the private retirement savings system. “The IIAC believes that neither a mandatory nor a voluntary supplemental expansion of the CPP is a high priority. Rather, targeted improvements to existing tax assisted savings vehicles can help Canadian maximize their retirement savings opportunities,” it IIAC submission says.
With that in mind, the IIAC calls on the government to boost annual RRSP contribution limits. In its submission, the IIAC acknowledges that there is a huge amount of unused RRSP contribution room overall, but stresses that “individuals closer to retirement are most likely maximizing their RRSP contributions and could benefit from increased limits.”
Increasing contribution limits would lower tax revenue, the IIAC concedes, but the trade group’s submission argues that “it is important to recognize that this is largely a deferral.”
In addition, the government should make accommodations in the RRSP rules for workers who suffer temporary career disruptions, the IIAC submission recommends. As well, it calls for the elimination of mandatory minimum withdrawals for RRIF holders; and urges the government to provide relief from the payroll tax for group RRSP contributions.
To bolster economic growth, the IIAC submission recommends that the government introduce a policy to allow investors to defer capital gains tax when the proceeds of a taxable gain are reinvested in the shares of a small business within six months.
This approach, the IIAC argues, would “unlock significant amounts of capital tied-up in low return investments and would encourage investors to take advantage of opportunities offered by small-cap publicly listed companies with faster growth potential. It would improve overall financing conditions in the public venture markets.”
In it’s submission, the IIA also reiterates its call for a policy to help drive investment in small Canadian companies modelled on the U.K.’s Enterprise Investment Scheme (EIS) and Seed Enterprise Investment Scheme (SEIS). Both of these schemes provide tax breaks to investors in startups, which the IIAC says would help stimulate investment in small businesses that are critical sources of economic growth.