When the federal budget is brought down this month, investment industry organizations will be looking for measures that will help clients do a better job of saving for retirement.

Topping the wish lists is an improved ability to shelter at least a portion of capital gains.

Coming in at a close second is deferring the age at which clients must convert their RRSPs to RRIFs.

The insurance industry wants to see a restructuring of RESPs so insurance professionals can get into that market.

And there are continued calls for an increase in the RRSP contribution limits.

The Investment Funds Institute of Canada’s wish list contains a reminder to the Conservative government about its campaign promise to eliminate taxation of capital gains that are reinvested within six months. Tax experts support some variation of this idea.

The C.D. Howe Institute has put forward a proposal for “capital gains deferral accounts” that would allow taxpayers to roll over investments within the account, deferring taxes until assets are withdrawn from it. To minimize the impact on federal tax revenue, the Toronto-based institute proposes a lifetime contribution limit of $150,000.

The Independent Financial Brokers of Canada supports the notion of capital gains deferral. “It would be quite positive for the investment community,” says John Whaley, the IFB’s executive director.

IFIC, however, is concerned about the administrative burden involved in tracking reinvestment, says Jamie Golombek, chairman of IFIC’s tax issues committee. Instead, he says, Ottawa should simply reinstate a lifetime capital gains exemption similar to the exemption that was eliminated in 1994. IFIC is suggesting a lifetime exemption of $100,000.

The Conference of Advanced Life Underwriting is seeking two specific changes. CALU lobbies Parliament on issues affecting insurance, particularly taxation, on behalf of its members and Advocis. CALU wants to see an increase in the RRSP contribution limits, as well as an increase in the age at which an RRSP must mature — to 72 from 69, says Ted Ballantyne, CALU’s director of advanced tax policy.

The 2005 federal budget increased the RRSP contribution limit to $18,000 from $16,500 for the 2006 tax year. Over time, the limit will increase to a maximum of $22,000 by the year 2010.

CALU argues that the $22,000 limit should be closer to $30,000, based on annual inflation adjustments of 3% a year. That would bring contribution limits in line with similar types of savings plans in the U.S. and Britain, CALU says.

Both IFIC and the IFB would also like to see an increase in RRSP contribution limits.

The alternative to a dramatic increase in RRSP limits would be the establishment of a system for tax-prepaid savings plans, CALU says. TPSPs were first proposed a few years ago by the C.D. Howe Institute. Unlike RRSPs, TPSPs would not provide tax deductions for contributions, but planholders would not be taxed when they eventually withdrew the money.

This idea was discussed in the 2003 and 2004 federal budgets. In 2004, Ottawa said that “Finance is continuing to examine and assess TPSPs and other approaches to improve the tax treatment of savings.” But there was no mention of TPSPs in the Liberals’ 2005 budget, and the Conservatives haven’t shown any interest in the idea.

Ballantyne says some of the Finance Department’s concerns over TPSPs relate to the potential impact TPSP income would have on income-tested social benefits.

However, he says, with the recent proposal to allow pension income-splitting among seniors who are spouses or common-law partners, that concern should be greatly alleviated.

IFIC also advocates that Ottawa adopt a TPSP system. Furthermore, IFIC is advocating that low-income Canadians be encouraged to use TPSPs through the establishment of a grant — similar to the education savings grant that Ottawa offers to encourage the use of RESPs.

For example, says Golombek, if a low-income individual contributes $1,000 to a TPSP during a given tax year, Ottawa could contribute a grant of $200.

Both IFIC and CALU want to see a change in timing for converting an RRSP to a RRIF. Since 1997, Ottawa has mandated that RRSPs mature no later than the year during which the planholder turns 69. Before that, it was age 71.

This change was introduced when the federal government was in a deficit position, says Ballantyne. Ten years later, he notes, Canadians are in a low interest rate environment. If the age for RRSP conversion was increased to 72, he says, the additional three years of tax-sheltered growth would help offset the impact of sustained low interest rates on retirement income.

@page_break@IFIC goes even further than CALU, advocating that the age be extended to 73. It calls on demographic evidence to support its proposal. With Canadians living longer and work shortages predicted for the future, IFIC suggests, workers should be encouraged to stay in the labour force longer and, therefore, be allowed more time to contribute to their RRSPs.

IFIC is also asking Ottawa to eliminate RRSPs and RRIFs from the clawback calculations for the guaranteed income supplement given to seniors. Applying the clawback to these vehicles is a disincentive for low-income Canadians to save for retirement, says IFIC. Removing it would encourage them to start saving.

The Canadian Life and Health Insurance Association is seeking two changes to the Income Tax Act. The CLHIA wants Ottawa to change the requirement that RESPs be set up as trusts.

It’s no longer appropriate, says Jim Witol, the CLHIA’s vice president of taxation and research. He points out that many RESPs have changed: they don’t necessarily pool investments, and the proceeds can be paid out to an individual or the children of one family rather than to several unrelated plan members.

Yet, he says, life insurers are unable to offer RESPs without partnering with a third-party trustee. This adds extra management costs and constrains insurers from offering RESPs on a competitive basis.

Removing the trust requirement would increase competition among RESP providers and reduce client costs, Witol says: “Just as life insurance companies are allowed to sell RRSPs, we’re requesting that we be able to sell RESPs rather than [having to] link up with a trust company.”

The CLHIA also wants Ottawa to eliminate the capital tax completely on financial institutions. Although Ottawa has been steadily reducing the impact of capital taxes since 2000, says Witol, it is still imposed on institutions with more than $1 billion in capital. He says that taxing the capital held by financial institutions to ensure their solvency impedes their competitiveness. IE