Recent changes to the mandatory minimum withdrawal rules for registered retirement income funds (RRIFs) will reduce the risk that many Canadians will outlive their savings, but the federal government should consider scrapping the rules altogether, suggests a report from the Toronto-based C.D. Howe Institute published on Thursday.

Amid low yields on safe investments and continuing increases in longevity, for many Canadians the risk of outliving their savings is still significant under the new rules, the report, Drawing Down Our Savings: The Prospects for RRIF Holders Following the 2015 Federal Budget, warns.

In calculating that the new rules will reduce the risk of outliving retirement savings, the 2015 federal budget assumes real investment returns of 3%, the report notes, yet real returns on safe investments are currently negative.

To get a look at the impact of the new rules in the current environment, the report runs the budget’s projections assuming zero real returns and finds that seniors, especially women, still face a material risk of outliving their tax-deferred savings under the new rules.

As a result, the report recommends that the government should either commit to continuing to liberalize the rules. Or, it suggests that the government consider scrapping the rules altogether.

“If more regular adjustments to keep the withdrawals aligned with returns and longevity are impractical, eliminating minimum withdrawals entirely may be the best way to help retirees enjoy the lifelong security they are striving to achieve,” the report states.

The motive for forcing RRIF holders to draw down their savings is to accelerate the government’s receipt of tax revenue, and to accelerate the revenue received from clawing back income-tested programs, such as Old Age Security (OAS) and the Guaranteed Income Supplement (GIS), the report points out.

The report questions whether this objective makes sense. “Governments are, for practical purposes, immortal, so the timing of receipts and payments matters less to them. Retirees are mortal, so timing may matter more to them,” it states.

Forced drawdowns make no sense for several group, the report states, including: retirees whose withdrawals trigger clawbacks; retirees who are daunted by tax planning and investing outside RRIFs; taxpayers that are unable to work longer; and seniors facing sizeable expenses such as long-term care.

“More generally, foreseeable demands on individual and public resources suggest that encouraging or forcing dis-saving is a bad idea,” it states. “The more future seniors have ample assets to finance such needs as health and long-term care, as well as the enjoyments of retirement, the better off Canada will be.”

Although eliminating the withdrawal rules would delay the income the government would get by taxing and clawing back benefits, the overall fiscal impact would be negligible, the report concludes. However, eliminating the minimums “would remove complexity in financial planning and alleviate a threat to income security in retirement” for holders of RRIFs.

“Government impatience for revenue should not force holders of RRIFs and similar tax-deferred vehicles to deplete their nest-eggs prematurely. While the 2015 budget’s changes are a step in the right direction, retirees need further changes to these rules if they are to enjoy the post-retirement security they are striving to achieve,” the report concludes.