A Senate committee report on retirement savings vehicles calls on the federal government to create a new, voluntary national savings plan, along with proposed changes to RRSPs and TFSAs. The report also calls for greater oversight of the investment industry.

The report of the Standing Senate Committee on Banking, Trade and Commerce, tabled Tuesday, makes six main recommendations, including proposed changes to the rules concerning RRSPs and TFSAs.

One of the primary recommendations is for the creation of a Canada-wide voluntary, auto-enrollment savings plan. The committee says it believes that Canadians would be best able to reach their retirement savings goals “through participation in a Canada-wide voluntary plan that would enable them to benefit from the lower fees and shared risk that may result from membership in a group.”

It suggests that a voluntary plan would help bridge the gap that the committee perceives exists between those with an occupational pension plan, and those without such a plan; the gap that it believes sometimes exists between defined benefit and defined contribution pension plan members; and that it thinks almost always exists between public-sector and private-sector pension plan members. Moreover, the committee feels it would increase retirement saving among Canadians.

Among its other recommendations, the report calls on the federal government to retain the annual RRSP contribution limit at 18% of earned income, to a maximum dollar amount indexed to growth in the average wage. It says that the government should take action to encourage multi-employer pension plans, including RRSPs.

It also calls for legislative amendments to ensure that, while remaining taxable, withdrawals from RRSPs have no impact on eligibility for, or the amount of, federal income-tested benefits and tax credits.

The report says the federal government should amend the Income Tax Act. One change would permit contributions to RRSPs until age 75, before they have to be used to purchase annuities or converted to RRIFs. Another change would to set an amount for lifetime contributions to a TFSA, starting at $100,000, indexed to inflation.

The report also calls on the government to expand the mandate of the Financial Consumer Agency of Canada. The agency would be able to undertake an oversight and public education role concerning:
> the conduct of investment advisers and managers;
> any real or perceived conflicts of interest by investment advisors and managers;
> the fees charged by those in the investment industry; and
> the relationship between fees and investment performance.

“Our report recognizes that, while the nation’s retirement savings system seems to be working quite well for a number of Canadians, it would benefit from some changes being made, particularly for such groups as middle-income Canadians, self-employed persons, and employees of small and medium-sized employers that may face barriers in sponsoring an occupational pension plan,” stated Senator Michael Meighen, chairman of the Senate banking committee.

“Based on the testimony presented to the committee and data indicating the extent to which unused RRSP, and perhaps TFSA, contribution room exists for some Canadians, it is our hope that these groups, in particular, will benefit from our proposed recommendations,” Meighen added.

IE