Editor’s Note: CARP recently received a very insightful note on pensions and the current retirement income system from one Mr. C. C. in Winnipeg Manitoba. He raises some excellent point – below is the text of Mr. C.’s letter as well as CARP’s response.
Ms. Eng. I received CARP Action Online today and want to congratulate and thank you for this particular issue.
For a bit of background on myself –
- I was involved with the Manitoba Society of Seniors in it’s active years and was involved with the locked-in pension issue that saw changes to the Manitoba locked in pension act.
- I retired in 1989 at age 55 from the retail trade and my sources of income have been from savings during my working life thru RRSP’s and depending on the OAS/CPP/GIS. At time of retirement it was hoped and anticipated that interest income would be in the neighbourhood of 10% or thereabouts. Well we all know where this dream went. Fortunately for us we own our home in Winnipeg, which has seen substantial increases in value in the past few years. My philosophy now is “it is not what income you have, but rather the expenditures you incur”. And that works pretty well for us.
In reading the articles I am very impressed and would hope that many of the younger generations would also take note of them.
I would like to make some suggestions and comments that I think are extremely important in today’s income after work situation :
1. RRSP income. When I retired I was unable to claim RRSP income as a tax deduction until I was 65. If this is still the case it is one that should be addressed. If a person has no employment income, why are funds put into RRSP’s not an income taxable deduction?
2. When working on the locked-in pension legislation, although it did not affect me, I was very concerned with the fact that many people were not aware of provincial legislation that drastically affected their ability to draw funds from their accounts. At that time Manitoba was restricted to 6% a year withdrawal. We were able to see the government of Manitoba change the locked-in pension withdrawal to 1 withdrawal of 50% of the funds and then a maximum of 6% a year withdrawal on the balance.
In Saskatchewan at that time, legislation had been changed to allow residents to withdraw 100% of their funds if desired.
I do believe that some provinces and the federal government have now altered their locked-in pension legislation to be more in agreement with current legislation in Manitoba.
I do believe that this is a very important issue and more emphasis should be put on all provinces and the federal government to follow the legislation of Saskatchewan on locked-in pension legislation and allow 100% conversion to funds that are available to the individual.
3. I am very concerned with the PRPP plans in the hands of financial institutions that will place administrative costs on holders. The CARP efforts to push for more legislation similar to CPP and the method of administration and investment would seem to this individual a much for sensible and beneficial long term plan.
You and your team are doing Great Advocacy Work – It is Very Much Appreciated. Thank you
Take care and enjoy
C. C. Winnipeg, Manitoba
CARP’s Repsonse: Continuing to contribute to RRSP after retirement is an interesting suggestion. The TFSA allows you additional tax-deferred room but no deduction for the contribution. We have advocated for increasing the TFSA substantially to allow people to recover the tax-deferred room they lost in the 2008 market crash. As you may know, the TFSA was increased by $500 this year . Since the RRSP is meant to provide retirement income, we need to refocus the initiative to allow smoothing of taxable income regardless of whether it is working income or investment income especially after retirement.
We continue to press for unlocking of locked in funds –and I believe all provinces and the federal government now have 50% withdrawal and hardship provisions. We were able to get the Ontario government to waive the withdrawal fees on hardship cases for a two years. We will follow up to see where that stands now.
And of course, we need your voice along with all other CAPR members to remind the Finance Ministers that they are the only ones who can facilitate any viable supplementary retirement savings vehicle and need to act.