The Canadian Life and Health Insurance Association is recommending a number of ways the federal government can help ensure Canadians’ retirement income security in its submission for the 2018 federal budget.
With more Canadians moving into capital accumulation plans, people need to have better options available to help secure their retirement, wrote the organization, noting there’s an increasing need for retirees to convert some or all of the savings accumulated in their registered accounts into guaranteed lifetime income streams.
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The CLHIA is suggesting the government review current tax and pension legislation to help facilitate the purchase of deferred annuities. Deferred products are helpful because people wouldn’t have to wait to choose annuities based on the market rates available when they retire, the submission noted. “One way to minimize this risk and increase retirement incomes is to allow gradual annuity purchases prior to the cusp of retirement, even though income payments from those annuities will not start until retirement or later.”
The CLHIA is also asking the government to permit some flexibility beyond retirement by allowing Canadians in tax-deferred plans to retain investment control. “For instance, a holder of [a registered retirement income fund] might choose to purchase laddered annuities within that plan, to increase guaranteed lifetime income commencing at age 80 or later,” the submission stated.
It added that allowing Canadians to access part of their tax-deferred savings prior to a certain age could provide better longevity protection and reduce the burden on public income security programs.
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Lastly, CLHIA noted that with many Canadians using tax-free savings accounts to supplement their retirement savings, the government should consider allowing people to waive liquidity and use the accounts to hold life annuities when they’re closer to retirement.
“These options would allow individuals within tax-advantaged savings and retirement plans to lock in guaranteed income streams at opportune times while adding no cost to the tax system, since those savings are already exempt from tax reporting until actually paid out of such plans,” the CLHIA wrote in its submission.
Besides the recommendations, CLHIA also said it supports the government’s plans to work with private investors in developing infrastructure projects. In its submission, it wrote that beyond large institutional investors like pension funds, the government should also look at Canadian life and health insurers as worthwhile partners for such projects. For example, unlike very large investors, the life and health insurance industry is willing and able to invest in smaller, local projects that require smaller pools of capital, the CLHIA noted.
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