The Investment Industry Association of Canada (IIAC) says it "strongly endorses" the retirement planning measures announced in the federal budget.
Speaking on behalf of the association's 147 investment dealer member firms, IIAC president Ian Russell expressed his pleasure at seeing the federal government increase the Tax Free Savings Account (TFSA) contribution limits and reduce the Registered Retirement Income Funds (RRIFs) minimum annual withdrawal amounts.
Russell believes that increasing the TFSA limit from $5,500 to $10,000 per year will help to close the retirement savings gap for those with lower incomes, especially older people. “Statistics show that 71% of Canadians maximizing their TFSAs are over the age of 55,” he says. He points out that people over the age of 71 who are no longer able to contribute to RRSPs will now be able to take advantage of the extra TFSA contribution room.
As for the amount of revenue that the government is forgoing by allowing more money to be stashed away inside TFSAs, the IIAC suggests that this will be offset by taxes generated when these savings are channelled into public and private investments, creating jobs and economic growth.
The IIAC has long argued that the minimum annual withdrawal requirements should be removed from RRIFs, so it was also pleased to see that, under the new RRIF guidelines, a 71 year old person will only have to withdraw 5.28% of their assets, down from the 7.38% that was required under the old rules. “In light of increasing life expectancy, changes to these requirements will provide greater flexibility for Canadians to manage their RRIFs more effectively,” concludes Russell.