Ottawa is continuing to examine the possibility of introducing tax-prepaid savings plans (TPSPs) as an alternative to RRSPs. The finance department has completed the round of consultations with the investment industry and tax experts announced in last year’s budget and is reviewing the results.

In the budget document released today, Ottawa says: “The question of whether a new type of savings plan, such as a TPSP, could be appropriate for Canada raised a number of important issue which require further consideration.” No further specifics are given, but the fact that TPSPs are still on the agenda is an indication that Ottawa may be considering draft legislation.

TPSPs could motivate lower- and middle-income Canadians to save more, resulting in a potential boon for the investment industry. Like RRSPs, TPSPs provide a shelter for invested funds. Contributors would not receive contribution deduction against their income but the attraction for contributing to a TPSP would be that the accumulated funds are not taxed when they are withdrawn.

The C.D. Howe Institute first put forward TPSP in 2001 by as potential tax system-assisted savings vehicles. Since then Ottawa has received submissions from several tax-research groups and businesses advocating TPSPs. Several other countries, such as the U.S. and Britain, have utilized a combination of RRSP-type vehicles and TPSP-type vehicles.