The federal government should consider retirement income system reforms that eliminate taxes on personal savings, and that incorporate the private sector, the Canadian Institute of Chartered Accountants suggests.

In CICA’s submission to the government on the retirement income system, the institute urges the government to more closely examine the system to determine how effectively it is working.

“It is important to further examine the issue of retirement income before specific reforms are undertaken,” said Kevin Dancey, president and CEO of CICA. “It is important to determine whether or not certain segments of the population are saving adequately for their retirement. If the answer is no, more research is likely needed into behaviours and incentives to learn the reasons why.”

If the government determines that Canadians are failing to save enough for their retirement, CICA says it should consider reducing or eliminating the income tax on personal savings by taking such measures as increasing the contribution limits for Tax Free Savings Accounts and Registered Retirement Savings Plans.

The institute also recommends modifying RRSP and Registered Retirement Income Fund rules to allow greater tax deferrals on retirement savings; and developing savings incentives, perhaps through enhanced credits, to encourage younger Canadians to start saving earlier.

Another proposal raised in the CICA submission is allowing non-working spouses to contribute to the Canadian Pension Plan or Quebec Pension Plan.

Allow private sector to provide solutions

CICA also calls for the private sector to continue to play a key role in the system.

“The government should review the regulatory framework governing pensions plans to ensure it does not unnecessarily inhibit innovation in the private sector market,” Dancey said.

The institute suggests changes that allow for more risk pooling, decreased costs of administration or facilitated participation by both employers and employees. Examples include treating contributions to group RRSPs on the same basis as contribution to a registered pension plan for payroll withholding purposes or facilitating Defined Contribution Multi Employer Plans.

“These changes could be particularly beneficial for the self-employed and Canada’s small businesses,” the submission says.

CICA says it does not support the development of any new, government-sponsored voluntary schemes.

“We believe that such initiatives would require the inclusion of significant incentives — costing deficit-laden governments scarce funds — and would further complicate the system,” the submission says. “If there is a demand for new voluntary programs, the changes noted above to the personal income tax system and the regulatory framework would allow the private sector to address this need.”

IE