November 27, 2008
TORONTO, ON: CARP welcomes the relief for retirees announced in today’s Economic Statement but reiterates its call for a full moratorium on mandated RRIF withdrawals. CARP is also encouraged by announcements that will enhance pension and retirement security.
Overall, CARP members and retirees will be encouraged by the changes announced in the Economic Statement and gratified that the Finance Minister has heeded the calls for relief and protection of our retirement security. However, we believe he has not gone far enough,” said Susan Eng, Vice President, Advocacy of CARP
The Finance Minister announced a 25% reduction in the amount of mandated minimum Registered Retirement Income Fund [RRIF] withdrawals whereas CARP has asked for a full 2 year moratorium on the withdrawals.
“For people who have watched their retirement savings disappear before their eyes, a 25% reduction in the mandated withdrawals is most certainly better than nothing but really doesn’t go far enough to deal with the anxiety people are feeling, A two year moratorium is needed,” added Eng.
Federally regulated pension sponsors [employers] will be permitted to extend their solvency payment schedule provided they get the agreement of plan members and retirees or secure their obligations with a letter of credit. CARP had asked for conditions to be put on the sponsors in exchange for the time extension in order to protect the pensioners.
“Pension members will be relieved to learn that the Minister has kept in mind the need to protect their pensions while allowing the sponsors more time to make up deficits,” said Eng.
The Finance Minister announced consultations on pension framework including solvency funding rules and other structural concerns. CARP has called for just such a Pension Summit of all the Finance Ministers but has asked that knowledgeable representatives of retirees be included.
“The time is right for wholesale reform of the pension landscape to rebalance the rights and powers of the employers and the plan members. It is not only time to pay attention to something that will affect all of us but it is also time for those most affected to have a seat at the table,” said Eng
A National Securities Regulator to address the serious flaws in the market system. CARP has supported the call for a national regulator, but without the extremes of the current market chaos, had doubts that federal provincial cooperation would be possible. However, for investors, the more important aspect of the a national oversight body is the enforcement capability and no mention was made of that in the announcement.
“For investors, especially retirees who have been buffeted about by this market turmoil, the enforcement of market regulations is much more important than whether there is one national regulator or several provincial ones. There have to be real consequences for those who have played fast and loose with our retirement savings,” said Eng.
Current tax rules require people to withdraw fixed amounts from their RRIFs after reaching age 71 and many must sell their stocks to fund the tax payable on such withdrawals if they do not have other cash, even if they do not have to sell the stocks in order to make the withdrawals.