“Not only it is unacceptable to treat Canadians differently when it comes to accessing their own money; but clearly, those who are willing to remove funds from tax-sheltered vehicles are far more likely to inject money into the economy immediately. This is real economic stimulus and earns tax revenue for the government at the same time.” added Eng.
The federal and provincial legislation governing pensions do not allow pension plan members or former members to cash in the commuted value of benefits earned in their pension plans. This also applies to life income funds (“LIF” or “LIFs”) created as a result of termination of employment. The locking in requirements differ across the country.
Moratorium on Mandated RRIF Withdrawals
CARP has been on the record as calling for complete elimination of the mandatory RRIF withdrawal provisions because it forces people to draw down their tax deferred savings unnecessarily according to a rigid schedule rather than respecting their individual circumstances.
In this pre-budget submission, CARP is calling on Finance Minister James Flaherty to place a two-year moratorium on mandated withdrawals from Registered Retirement Income funds [RRIFs] so that people are not forced to sell their stocks into this severely depressed market.
In response, the November Economic Statement proposed a 25% reduction in mandated RRIF withdrawals which has to be seen as response to all emails and letters to the MPs and the Finance Minister that CARP encouraged its members to send. Unfortunately, the last minute changes caused no end of confusion and frustration for people hoping to take advantage of the offer in making their year end withdrawals in December.
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.
The situation is made worse by the precipitous drop in stock values and the fact that the amount to be withdrawn is calculated on January 1. So, not only are the savings depleted by the mandatory withdrawals, but with the reduced value, many more units must be withdrawn to meet the minimum withdrawal requirements and the retirement savings would be depleted at alarming rates. This compounds the anxiety that is already being felt as retirees watch their savings disappear before their eyes.
CARP has been inundated with calls from its members across the country who are looking for government action and see a moratorium on the mandated withdrawals as a measure of immediate relief. CARP got even more calls when the proposed 25% reduction could not be accommodated by the financial institutions with such short notice.
Canadians 45plus are the most engaged and active voters. In 2004, they cast nearly 9 million ballots, or 64 per cent of all votes cast. In addition to the pre-budget submission, CARP has strongly encouraged its members to support CARP’s campaign by directly emailing the Finance Minister and local elected representatives via E-VOICE, CARP’s effective online advocacy tool. For E-VOICE details, click http://www.carp.ca
CARP is a national, non-partisan, non-profit organization committed to advocating for a New Vision of Aging for Canada, social change that will bring financial security, equitable access to health care and freedom from discrimination. CARP seeks to ensure that the marketplace serves the needs and expectations of our generation and provides value-added benefits, products and services to our members. Through our network of chapters across Canada, CARP is dedicated to building a sense of community and shared values among our members in support of CARP’s mission.
