Most financial professionals — not to mention the government — are still working through the changes announced in the 2016 federal budget, but the Investment Association of Canada has forged ahead with its 2017 budget recommendations.
The industry group gave the House of Commons’ finance committee its broad 2017 recommendations today, which included the need to fully address the retirement savings gap.
Improvements to the Canada Pension Plan will not properly address the challenges faced by younger Canadians, who need strong employer-based savings plans to supplement the CPP, and Canadians close to retirement, the group says. The group argues that the mandatory registered retirement savings plan to registered retirement income fund conversion age should be eliminated, and that seniors be allowed to contribute to their RRSPs past age 71.
The IIAC argues that group RRSPs are at a tax disadvantage compared to pooled registered pension plans and defined contribution plans. “For example, employer contributions to a Group RRSP are treated as earnings and, hence, payroll taxes like CPP and EI are deducted from those contributions,” the IIAC writes.
“This uneven treatment is justified on the spurious grounds that Group RRSPs are not really a pension plan as funds can be withdrawn before formal retirement. The IIAC recommends that the government relieve employers’ and employees’ contributions to Group RRSPs from payroll tax, which will lead to higher savings for individuals using these plans.”
This article was originally published on Benefits Canada‘s companion site, Advisor.ca