Thank you very much.
My name is Debbie Pearl-Weinberg, and I am chair of the taxation working group of the Investment Funds Institute of Canada, otherwise known as IFIC. I work for CIBC as a general tax counsel, but I'm here today representing IFIC. My comments do not necessarily reflect the views of my employer, CIBC.
IFIC is a trade association representing the investment fund industry. Investment funds are a particular type of pooled investment products, the largest of which are mutual funds. Canadians own approximately $600 billion in investment funds. They're widely held by Canadians and primarily owned by middle-income Canadians. Fifty-two percent of mutual funds are owned by people earning less than $100,000 per year, and 50% of mutual funds are owned either by those retired or those approaching retirement. They are the number one RRSP investment in Canada; 70% of RRSPs are invested in mutual funds.
IFIC's proposals to you are as follows. The first is equality for pension income-splitting. Allow RRIF holders the same opportunities to split income with their spouses as those with pension plans. The vast majority of Canadians will rely on their RRSP as their primary source of retirement income. But approximately two out of three Canadians are not members of a defined benefit or defined contribution registered pension plan. Currently those Canadians participating in a registered pension plan can split income with a spouse at the age of 55. But those holdings RRIFs, who represent 60% of Canadians, must wait until age 65 to similarly split income. This latter group includes those holding a RRIF, where the original funds were transferred from a registered pension plan to a locked-in RRIF, otherwise known as a LIF, or a life income fund.
The result is that some Canadians, who retire at a younger age with retirement savings held in RRIFs, will be left with lower household net income than their neighbours who retire at the same age but rely on registered pension plans to fund their retirement. IFIC recommends that income from a RRIF be eligible for income-splitting at age 55, similar to income from registered pension plans.
The second proposal is to adjust the dividend gross-up in means-tested net income. Currently the means test for determining whether a senior is subject to a clawback of both the guaranteed income supplement, GIS, and the old age security benefit, OAS, is based on the grossed-up amount of a dividend rather than the actual dividend amount received. That means income in determining whether a senior has met the clawback threshold uses the gross-up amount of a dividend rather than the actual amount of the dividend received.
For example, if somebody received a dividend in the amount of $10,000 for purposes of this means test, $14,500 would currently be included in their income. Because of this, seniors who earn dividend income, rather than other types of income such as salary or interest, may face a larger social benefits repayment. This encourages certain seniors to avoid earning dividend income altogether, which reduces the types of investments they'll hold on retirement. IFIC recommends that only the actual amount of the dividend be included in the means test for the clawback calculation of GIS and OAS.
Third, allow the application of capital losses against income. Many Canadians have experienced significant capital losses during the recent market downturn, which cannot be used to reduce their income from other sources. It would provide great relief to such investors if a portion of such losses were eligible to offset other types of income. Note that prior to 1985, Canadians were eligible to such an offset. IFIC recommends that up to $5,000 of capital losses be eligible to be applied against income from other sources.
Thank you very much.