FOR IMMEDIATE RELEASE
April 21, 2015
CARP members welcome government action in Budget 2015 to reduce mandatory RRIF withdrawal rates for retirees, to almost double the TFSA from $5,500 to $10,000, to increase the amount of time Canadians can draw on employment insurance for compassionate leave to provide caregiving to loved ones.
TORONTO, ON: CARP members will appreciate the specific commitments in Budget 2015 that will give Canadians more tax-free savings room and more control over their private retirement savings. Increased support for caregiver leave will be a significant boost to people who have to leave work to provide care to family. CARP members will also welcome the new Home Accessibility Tax Credit that will be applied up to $10,000 of eligible home renovation expenditures per year, providing up to $1,500 in tax relief. The credit will help many seniors and those with disabilities to live healthy independent lives in their own homes. But CARP members still expect the federal government to take a leadership role on national health standards and helping Canadians retire with financial security.
Two-thirds of CARP members support TFSA increase. In a CARP Poll™, CARP members voice strong support for increasing the annual TFSA contribution limit to $10,000. The vast majority (81%) contribute to a TFSA. In the CARP Poll™ answered by more than 1,400 CARP members:
- Two-thirds (67%) support increasing TFSA limit from $5500 to $10000 [39% support it strongly]
- The vast majority (81%) have a TFSA
- 71% want changes to the RRIF rules to avoid outliving their money
- 81% think the government should encourage saving for retirement, not spending for today
The support for increasing the TFSA limit is rooted in concern for adequate retirement income and any measure that encourages it is a step in the right direction. TFSAs have particular value for retirees who can no longer contribute to RRSPs and for lower income earners who do not benefit as much from tax deductible RRSP contributions. TFSA contributions are not deductible, so taxpayers pay taxes currently and eventually take the savings and earning out tax free. RRSP contributions are deductible currently but are taxable when withdrawn. When TFSA’s were first introduced, CARP advocated for extra room for older Canadians who lost significant investments during the market crash and needed tax-free room to rebuild retirement savings.
CARP members strongly support relaxed rules for RRIF withdrawals. Almost 90% of CARP members have or will have RRIFs, but more than half are worried they will outlive these savings. Read CARP’s Position Paper on RRIF Elimination
Mandatory RRIF withdrawals currently force seniors to draw down and pay tax on their retirement savings in increasing percentages until age 91 when their RRIF would be close to empty. People are left with much reduced funds just when they have the greatest needs and given today’s increased longevity, the RRIF rules put ever more people at risk of outliving their savings.
There are 265,000 Canadians 90-plus today. The probability of reaching that age has doubled for women and tripled for men in the last two decades and together with the baby boom generation reaching these ages, the raw numbers of people living beyond 90 is expected to rise dramatically.
The counterproductive nature of the RRIF rules was shown in high relief during the market crash of 2008. RRIF withdrawals are calculated based on the asset value in January and most people would not withdraw until December, by which time share values had plunged by as much as 50% in 2008. Seniors then had to take out twice as many shares, thereby depleting their deferral room at an even faster pace, especially if they also needed to redeem additional shares to pay the tax. CARP members called for relief and were granted a 25% discount in the withdrawals required for 2008 only.
RRIF rules have not kept pace with increasing lifespans and time spent in retirement, declines in personal savings rates and reduced access to workplace pension plans. When the original RRIF rules and withdrawal rates were introduced in 1978 and then increased in 1992, lifespans and time spent in retirement were much shorter than today and Canadians on average spent less time in retirement. RRIF holders now face considerable likelihood of running out of money in late stages of retirement.
CARP members have long waited for additional caregiver support from the federal government. Increasing the compassionate care benefit through EI from the current maximum of six weeks to six months will provide a much needed boost in time to working caregivers who need to provide care to family members. It will also prevent the loss of income many heavy care providers face when forced to step away from employment to provide care. Read CARP’s Position Paper on Caregiver Support
- 8 million informal caregivers in Canada, representing 25% of all Canadians
- 2 million informal caregivers provide heavy care (20+ hours/week)
- 6 million of these provide care to a senior (75% of all informal caregivers)
- 70% of all care to seniors in the community are provided by informal caregivers
- The majority of caregivers are female (54%) and aged 45-64 (44%) – this group is of particular concern because they tend to outlive their spouses and suffer higher rates of work drop-out and poverty later in life.
“CARP members will welcome the proposals that will help them save and manage their savings for their retirement needs. The extension of EI compassionate benefits will also be very welcome for people who have had to drastically reduce their work hours to look after a loved one. The major change, even more important than increasing the 6 weeks benefit to 6 months, is the relaxing of the requirement of needing a 6 month terminal diagnosis to 12 months. That has been a major hurdle for access to this benefit and this is a very welcome change. To make it better, they should just remove the requirement altogether.” Susan Eng, VP Advocacy, CARP
“These changes are valuable vote getters in an election year but CARP members also want longer term structural change to help their children and grandchildren.” Susan Eng, VP Advocacy, CARP
Federal Leadership still required for national health standards and retirement income security
CARP will closely watch the upcoming federal election campaigns for commitments to tackle other areas where federal leadership is needed. Read CARP’s full 2015 Federal Budget Recommendations
Specifically, CARP is calling for:
- Increase income supports, especially for single seniors, including OAS, GIS and spousal allowances; increase exemption for casual earnings in GIS rules
- A reversal of the OAS age of eligibility from 67 back to 65
- Help for older workers to get and keep their jobs
- Increase CPP and/or create new universal pension plan
- Work with the provinces to create a national pharmacare plan, with an ultimate goal of first dollar coverage for all Canadians
- Work with the provinces to fund and set standards to improve access, affordability, and quality of post-acute and chronic care, in the home and in the community, with particular focus on dementia care
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.
For further information, please contact:
Sarah Park 416.607.2471
Michael Nicin 416.607.2479
Director of Policy
Anna Sotnykova 416.607.2475
Media & Communications Coordinator
CARP, A New Vision of Aging for Canada
or visit our website: www.carp.ca
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