Registered investments are now sacrosanct in Newfoundland and Labrador. The provincial government has passed new legislation that keeps registered retirement savings plans, as well as registered retirement income funds and deferred profit-sharing plans, out of the hands of credi-tors. In doing so, the government has opened the door for financial planners to attract new clients.

“This is a wonderful development,” says Millicent Hicks, a certified financial planner with TD Waterhouse Private Investment Advice in St. John’s.

First and foremost, she says, “People will have a greater sense of security, knowing their RRSPs or retirement income source are not on the hook should legal issues arise.”

The Judgment Enforcement (Amendment) Act, which came into effect last month, protects RRSPs, RRIFs and DPSPs from debt-collection methods in the same way registered pension plans are protected in the province. The goal was not to dissuade creditors, but to help Newfoundlanders and Labradoreans prepare financially for retirement.

“We wanted to encourage this type of saving,” says Tom Osborne, minister of justice. “Creditors did not object.”

In particular, the legislation was intended to give a helping hand to entrepreneurs, especially small-business owners, and by doing so help the provincial economy.

“This is an attraction for small-business operators,” adds Osborne. “They feel their retirement savings are safe. We felt an exemption would encourage entrepreneurs to invest in the province.”

The legislative thinking goes like this: Newfoundland and Labrador needs to attract and retain business. Most businesses in the province are small, with less than five employees. Therefore, to build up commerce, the government needs to meet the needs of small businesses. One of those needs is security.

“Our consideration was building the economy by allowing these individuals to save for retirement,” says Osborne.

“In Newfoundland,” Hicks says, “we have a high percentage of self-employed persons, so many people will be positively affected by this new legislation as business owners have to assume less personal risk.”

Another consideration for the justice minister was, well, justice. The provincial Pension Benefits Act has historically protected registered pension plan assets from creditors. The new legislation now does the same for RRSP investors.

“It’s a matter of fairness to owners and self-employed people,” says Osborne. “They should have the same protection as wage earners.”

Financial planners in the province agree. “It will level the playing field between those who save for retirement through employer pensions and through RRSPs, as well as between insurance and non-insurance RRSPs,” says Hicks.

It will do much more than that for planners. “For myself, it opens up a world of new clients because previously I could not offer segregated funds as an investment solution,” notes Hicks.

“If a client was purchasing seg funds solely for creditorproofing, that person now has a whole world of mutual fund investments available to choose from, with any type of financial advisor,” she adds. “Under this new legislation, the client will receive similar protection for RRSPs purchased through other financial institutions as they have via insurance companies.”

Another benefit of the legislation is that it simplifies and enhances the relationship between financial planner and client. “If [someone] were a client of a particular institution but had to go outside that umbrella to find creditorproof investments, that person now has the option of having his or her financial needs taken care of at one place only,” says Hicks. “This can save time as well as money.”

The Judgment Enforcement (Amendment) Act is a court-ordered mechanism through the Sheriff’s Office, which enforces a judge’s decision. Under the new amendments, if a judgment is ordered against a person to compensate for breach of contract or any other legal entanglement, the claimant cannot access retirement savings or pensions as part of the judgment. There is one exception: collection of child support payments.

An individual’s retirement savings remain secure as long as the money remains in an RRSP or another registered plan. Once funds are removed, however, creditors are free to come calling for their share of the money owed. “In future years, when you draw upon [the plan], it’s considered income. And that can be targeted by credi-tors,” says Osborne.

Newfoundland and Labrador is the fourth Canadian province to introduce protection for registered plans. Prince Edward Island has protected RRSPs and RRIFs since 1992; Saskatchewan introduced comparable legislation in 2003; and Manitoba in 2006. More provinces are expected to follow. IE

@page_break@