Correction:

This article has been edited for accuracy. The Conference for Advanced Life Underwriting’s position, as stated in the organization’s pre-budget submission is to “defer immediately or over time the requirement to convert an RRSP to a RRIF to age 75” (from the current age of 71).

We apologize for erroneously stating that CALU wanted to do away with the conversion requirement. 

Registered Retirement Income Fund (RRIF) formulas need to be more transparent and current withdrawal rules, which do not reflect that Canadians are working longer than they have in the past, are causing significant trouble for many over age 71, according to a submission to the Department of Finance (Finance Canada), made by the Conference for Advanced Life Underwriting (CALU).

The submission was made in response to a request for stakeholders to comment following the publication of a study undertaken by Finance Canada to study RRIFs, including an assessment of the current RRIF structure and rates. 

“Many Canadians are experiencing difficulties saving sufficient funds in their RRSP (Registered Retirement Savings Plan) due to competing needs for their financial resources early in their working lives,” the CALU submission states. “In addition, the requirement to convert an RRSP to a registered annuity or RRIF by age 71 means that those who may out of necessity continue to work later in life are not able to continue to benefit from tax deductible contributions to an RRSP.” 

They continue, saying many seniors are also forced by current rules to take money out of their RRIFs, even if there is no financial need to do so. These Canadians often find themselves unnecessarily in a higher tax bracket, causing them to lose government benefits. They also risk outliving their funds, CALU says, a problem that is further compounded by interest rate and equity market movements. 

CALU recommends that Finance Canada allow unused RRSP contribution room to be annually indexed, permit RRSP contributions to continue past age 71 and “defer immediately or over time the requirement to convert an RRSP to a RRIF to age 75” (from the current age of 71).

“We also recommend that the factors used to establish the RRIF minimum formula be made more transparent to the general public and that there be a regular process for the review of the RRIF minimum payout formula to ensure it continues to meet the income needs of older retirees,” they write.