Improving retirement nest eggs

Every year, the Investment Funds Institute of Canada and its volunteer member committees ponder ways to help Canadians retire properly. We are lucky enough to be able to present our carefully thought-out ideas to senior government officials in pre-budget consultations. We consider it a serious process, and count ourselves among those who pushed successfully for the elimination of the foreign-content restrictions on tax-deferred savings plans. That is just one example of our advocacy efforts.

A number of ideas are on our plate for the next budget, including:

> The Deferral Of Capital Gains Taxes On A Six-Month Investment. The federal Conservatives presented this idea prior to being elected but, so far, it hasn’t received much attention from the government. In principle, the plan would help consumers make wise investment decisions because it would give them time to contemplate their next move. It would also mean fewer people would hold onto investments just to avoid a tax liability.

> Increase RRSP Contribution Limits. This may sound like a broken record, but when you take a look at what’s happening on the pension scene nowadays, with defined-contribution plans taking over from defined-benefit plans and many companies slashing the pension provisions for employees, Canadians need to look out for themselves. This proposal has been made by the Retirement Income Coalition, of which IFIC is a member.

The coalition says increases in the RRSP limits have been deferred or cancelled by various governments and have fallen behind pension limits. There is a camp that says raising the limits will only benefit those with incomes greater than $100,000. But with costs rising all the time for essentials such as in-home care and long-term living, there is a great need for Canadians to have the ability to put money aside for such times.

> Tax-Prepaid Savings Plans. The idea for TPSPs originally came from the C.D. Howe Institute, and at one time received quite a bit of press. These plans would be used to supplement present retirement savings measures such as RRSPs and, from a tax perspective, would be treated like registered education savings plans. Contributions would not be deducted from taxable income, but withdrawals of original contributions made at a later date would not be taxable, either. The income earned within the plan, however, would be sheltered until the money is withdrawn. TPSPs are seen as a great way to help lower-income Canadians because the tax-free withdrawals of original contributions would not be used to claw back other senior benefits such as the guaranteed income supplement.

The wrinkle here for Ottawa is that the plans would defer tax revenue for an extended period of time, just as costs for institutions such as health care are expected to rise because the population is aging.

> Increasing The Age At Which Canadians Must Convert Their RRSPS To RRIFS Or Annuities. Remember when the minimum age to convert to a RRIF was reduced to 69 from 71, back in 1986? This was done to reflect the age at which most people retire. While most people are, indeed, retired by age 69, the elimination of mandatory retirement and longer life expectancy means it makes some sense to increase the age limit.

It is these kinds of ideas that IFIC is contemplating taking to the federal government in the next round of pre-budget submissions. The industry is looking hard at ways to make the present system work better for Canadians who hope to retire with a decent income. We will work with the government to make sure as many Canadians as possible get to realize that dream. IE

Joanne De Laurentiis is president and chief executive officer of the Investment Funds Institute of Canada.