Extra cash and combined with low interest rates should lead to an increase in RRSP contributions this year according to study by CIBC World Markets released today.

“During the stock market correction, Canadians have retreated from the market and renewed their love affair with their chequing accounts,” says Benjamin Tal, senior economist, CIBC World Markets. “With non-registered cash holdings about $40 billion above normal levels, some of these funds will likely be invested during RRSP season.”

As well, many people are expected to turn to credit to make their RRSP contributions this year. This is primarily due to weak income growth, extremely low interest rates and an increased inclination towards debt financing.

“We expect that 40% of contributors will borrow to finance all or part of their RRSP contributions for the 2003 tax year and estimated borrowing will total more than $2.5 billion,” says Tal.

The study also found that Canadians are not currently maximizing their RRSP contributions. In 2002, almost 80% of tax filers had RRSP contribution room.

Since 1999, cumulative unused RRSP contribution room has increased by 34% to reach $367 billion. This is more than $19,000 on average in cumulative unused contribution room for each of the 19 million Canadians that have RRSP room, up from 13,800 in 1999.