The Standing Senate Committee on Banking, Trade and Commerce calls for changes to Canada's retirement savings system
Ottawa, October 19, 2010 – Senator Michael A. Meighen, Chair of the Standing Senate Committee on Banking, Trade and Commerce, tabled today the committee's final report on its study of retirement savings vehicles, specifically Tax-Free Savings Accounts and registered retirements savings plans (RRSPs).
"Our report, entitled Canadians Saving for their Future: A Secure Retirement, 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. 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," stated Senator Meighen.
One of the report's key recommendations is the creation of a Canada-wide voluntary plan. The committee believes that Canadians would be assisted best in reaching 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. The voluntary plan would help bridge the gap that the committee perceives exists between those without and those with an occupational pension plan, 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.
Senator Céline Hervieux-Payette, deputy chair of the committee, added: "Canadians should be able to live with dignity in their retirement years and the ability to do so depends, in part, on having adequate retirement income. In our view, the existing measures that provide incentives to save for retirement are important and effective for some groups. But if our goal is to provide a more secure retirement for Canadians, then the implementation of our recommendations is critically important. When making these changes, key attributes such as portability, vesting and locking in should be uppermost in the minds of policy makers."
With respect to the Tax-Free Savings Account, viewed as a useful vehicle in helping Canadians save, including for retirement, the committee recommends that the federal government establish lifetime inflation-adjusted contribution room of $100,000, in addition to the existing annual contribution room. This change could have several benefits. For example, the lifetime contribution room could be used by individuals who receive severance payments, an inheritance, funds associated with the sale of real estate or other "financial windfalls" to engage in tax-assisted savings. This recommendation for lifetime contribution room of $100,000, in addition to the existing annual amount, would also assist those who are self-employed and find the current definition of "earned income" restrictive for RRSP purposes, those with fewer years left to contribute because they are nearing retirement and who wish to increase their tax-assisted retirement saving, and those who currently contribute the maximum amount to their RRSPs and TFSAs.
Senator Meighen and Senator Hervieux-Payette will hold a press conference at 10:15 a.m. (ET) on Wednesday, October 20, 2010 at the National Press Theatre to present the committee's complete list of recommendations.
Earlier this year, the committee was authorized to examine: the extent to which Canadians are saving in Tax-Free Savings Accounts and registered retirement savings plans; federal measures that might be taken to increase the use of these savings vehicles as well as the fiscal cost of increased use; and, ways in which savings in these vehicles might be protected.
Over the course of its study, the committee held six meetings and received evidence from 26 groups and individuals with an interest in the topic. It tabled an interim report in June 2010 that summarizes the history, design, use and federal fiscal cost of the two savings vehicles which the committee was authorized to study.
Members of the Standing Senate Committee on Banking, Trade and Commerce include the honourable senators Salma Ataullahjan (Toronto – Ontario), Irving Gerstein (Ontario), Stephen Greene (Halifax – The Citadel – Nova Scotia), Mac Harb (Ontario), Céline Hervieux-Payette, P.C. (Bedford – Quebec), Vim Kochhar (Ontario), Paul J. Massicotte (De Lanaudière – Quebec), Michael A. Meighen, Q.C. (St. Marys – Ontario), Percy Mockler (New Brunswick), Wilfred P. Moore, Q.C. (Stanhope St. / South Shore – Nova Scotia), Donald H. Oliver, Q.C. (South Shore – Nova Scotia) and Pierrette Ringuette (New Brunswick).
To read the full report or learn more about the activities of the Standing Senate Committee on Banking, Trade and Commerce, visit the committee website: http://senate-senat.ca/bancom-e.asp.