The federal government should raise contribution limits for savers in RRSPs and defined-contribution pension plans who are at a major disadvantage compared to those in defined benefit pension plans, says a report by C. D. Howe Institute released Nov. 7.
"People are living longer and—even more importantly—yields on investments suitable for retirement saving are very low. These changes have raised the cost of obtaining a given level of retirement income," says William Robson, President and CEO of the C.D. Howe Institute and author of the report, Rethinking Limits on Tax-Deferred Retirement Savings in Canada.
Flexible tax-deferred regimes
Robson says he recommends raising the tax-deferred saving limit from 18 per cent to 30 per cent or more. In addition, he says the playing field should be leveled for savers catching up on contributions later in life, or for savers who have differently designed pension plans. Finally, he says the current annual savings limits should be replaced by flexible tax-deferred regimes, either by indexing unused contribution room for inflation, or establishing an inflation-indexed lifetime tax-deferred savings limit.
Unfair tax-treatment
"Defined-contribution plan participants and RRSP savers should enjoy the same opportunity for pension wealth as their defined-benefit plan and public-sector plan counterparts," says Robson. "All Canadians should have the ability to accumulate sufficient savings for retirement, and unfair tax-treatment should not stand in their way."
To learn more, read the full report here.
