The National Pensioners & Senior Citizens Federation says that it supports the proposed new tax on income trusts and accompanying tax relief for seniors.

“Our Federation urges all federal parties to support this positive and necessary package of tax reform that affects seniors in many ways,” it says in a news release.

On October 18, the NPSCF called on the government to stop future income trust conversions due to: the government revenue leakage; and, the fear that income trusts are being sold to seniors without sufficient investor protection. “The NPSCF has been particularly concerned about income trusts being sold to seniors on the basis of cash yields that are inaccurate, inflated and misleading,” it says. “Distributions are being paid above income, without prominent public disclosure of this fact. This imposes excessive risk for seniors, seeking retirement income and preservation of their capital.”

It points out that those owning income trusts in taxable accounts are not affected by the new tax plan. It admits there will be a modest reduction in the tax benefits for seniors owning income trusts in their RRSPs and RRIFs, but says that, “this is more than offset by the specific new measures for seniors of pension income splitting and the increase in the age credit. These specific pension measures provide $1.0 billion of tax savings in 2007-2008 and a total of $6.1 billion for the next six years.”

“The new income trusts tax, pension income splitting and increased age credit plan are on balance very positive for the retirement security of seniors,” it concludes. “Next, the federal and provincial governments need to make progress on reform of Canada’s system for investor protection.”

The NPSCF says it wants the federal government to create two new bodies – a national investor protection agency and an independent accounting standards board. “Every other industrialized country of the world has such bodies for the protection of its citizens and foreign investors. We have tried fragmented provincial regulation and self-regulation, where the setting of accounting standards and most investor protection are delegated to industry. The current system is failing seniors and individual Canadians saving for their own retirements.”