Mr. Speaker, I want to thank the member for Edmonton West for bringing this private member's bill forward. Many times the member and I do not see eye to eye, but I certainly have a lot of respect for him, and I enjoy listening to him.
It is my pleasure to rise today to speak to the private member's bill, Bill C-301, an act to amend the Income Tax Act and to make a related amendment to another act, which will affect registered retirement income funds, otherwise known as RRIFs.
The NDP is supporting the bill at second reading because we feel it deserves to be sent to committee for further study. The issue of mandatory minimum withdrawal requirements is an important issue for retirees trying to maintain an adequate income in their retirement.
It is our view that a detailed examination of the rules regarding RRIFs is necessary to help ensure that seniors are not outliving their savings. Retirement insecurity is reaching a crisis level in Canada, as many Canadians do not have adequate savings to maintain their lifestyle upon retirement. Any measures that will make it easier for seniors to maintain an adequate income must be looked at.
Much more needs to be done to help our seniors live with the dignity they deserve. The high cost of housing and drugs, the clawback of the GIS, and the indexing of pensions are just a few immediate issues. The government also needs to keep its promise to introduce a new seniors price index to make sure that old age security and the guaranteed income supplement keep up with rising costs.
Of more immediate concern is that the government must immediately fix the flaw in its new plan for enhanced CPP benefits. I am sure that members have heard the discussion about the mistake that the government made in Bill C-26 and how the exclusion of dropout provisions in the bill would have a negative impact on those who take time to raise children, especially women, and on those living with a disability. The government will have its chance next week at the finance ministers meeting to fix its mistake. We will all be watching.
This private member's bill will remove the mandatory minimum withdrawal requirements from registered retirement income funds and will change the retirement income fund definition. Registered retirement income funds, known as RRIFs, can be thought of as an extension of a person's registered retirements savings plan, or RRSP. An RRSP is used to help people save for retirement, while a RRIF is used to withdraw income during retirement. RRIFs are similar to RRSPs in several respects. Each allows for tax-deferred growth, offers several investment options, and is government regulated.
A major difference between an RRSP and a RRIF is that with an RRSP, a person can make annual contributions as long as they have earned income and have contribution room available. Withdrawals are optional and will be taxed. With a RRIF, contributions are not allowed, and a person must make minimum minimum mandatory withdrawals each year. RRIF rules and withdrawal rates were introduced in 1978, and then increased in 1992.
In 2015, the Conservative finance minister lowered the mandatory registered retirement income fund withdrawal amount to 5.27% from the previous 7.38%. Also, previous to 2007, the age limit for converting an RRSP was 69. The 2007 budget changed the age to 71, in order to strengthen incentives for older Canadians to work and save. When RRIF rules came into effect, lifespans and time spent in retirement were much shorter than they are today. RRIF holders now face the considerable likelihood of running out of money in late stages of retirement.
The NDP has long been in support of lowering these rates. In 2015, the NDP pension critic John Rafferty introduced Motion No. 595. It read:
That, in the opinion of the House, the government should review the Registered Retirement Income Fund mandatory minimum withdrawal thresholds and amend them to ensure they do not unduly force seniors to exhaust their savings too quickly.
The problem with the RRIF withdrawal schedule is that people are living longer, and if the schedule is followed then it is very likely that an account holder will run out of savings by age 92. At that point, the person who had saved diligently throughout their life will see their quality of life decline at a delicate time, through no fault of their own.
There are also concerns that RRIF rules can cause clawbacks on people's benefits from OAS and/or GIS. We know that people are living longer, and this fact will have an impact on seniors and on their ability to have enough money to see them through their retirement. In this context, it is interesting to look at some facts about today's seniors.
The probability today of a 71-year-old female reaching age 94 has almost doubled compared to 1992, from 13% to 24%. The probability of a 71-year-old male reaching that age has more than tripled, from 4% to 14%. There are 265,000 Canadians who are 90-plus years of age today. With the baby boom generation reaching these ages, the number of people living beyond 90 is expected to rise dramatically. By 2021, there are projected to be 355,000 Canadians aged 90-plus, including 80,000 people over the age of 95.
Most Canadians do not have alternatives to private savings for retirements besides CPP, OAS, and GIS. When RRIF rules were first put into place in the 1970s, Canadian households saved about 15% of income. By 2011, the household savings rate plummeted by a factor of five, to just above 3% of income. Canadians between the ages of 65 and 69 today hold only an average of $40,000 in RRSPs, which is a very modest amount. In 2011, workers aged 55 years and over accounted for 18% of total employment, compared to 15% in the 2006 census. This was the result of an aging baby boomer generation and increased participation of older workers in the labour force. Mandatory minimum RRIF withdrawals are becoming irrelevant as women and men are living at least twice as long, and staying in the labour force longer.
As I said earlier, the NDP intends to support this bill at second reading, as we feel it should be sent to a committee where the issues of RRIF withdrawal and income security for seniors can be properly studied. I am disappointed to hear that our Liberal colleagues will not be supporting the bill and are not in favour of this issue getting further study. However, then again, maybe I should not be surprised. The Liberals have made some progress on the issue of retirement insecurity with their modest increases in the GIS and their modest increases in benefits in the enhanced CPP proposal. That being said, the government has also launched a tax on some Canadian pensioners. Its failure to include dropout provisions in the enhanced CPP is certainly an attack on women and those living with disabilities.
We also have Bill C-27, which is clearly an attack on every worker and retiree who has invested in a defined benefit pension plan. It is a policy on which the former Conservative government did consultations and eventually decided not to move forward with it. Now it looks like the Liberal government is going to finish the work that the Conservatives started. The current government's plans are inconsistent and confusing. The strategy for dealing with the retirement income crisis is uneven, inadequate, and at the end of the day will be ineffective. Canadian seniors will be hurt as a result.
I urge all members to support this bill, so we can refer it to a committee where we can study how to better help Canadian seniors live with the security and dignity they deserve.