Thank you, Mr. Chair and committee members, for the opportunity to be here today with you.
I'm Warren Blatt, and in addition to being an independent financial adviser, I'm a member of the CALU board of directors, as well as chair of its government relations committee.
CALU and our sister organization, Advocis, represent approximately 11,000 insurance and financial advisers, who in turn provide financial advice to millions of Canadians. CALU appreciates this opportunity to comment on behalf of our members and their clients on two recommendations contained in its 2017 pre-budget submission.
By way of background, it is readily apparent that the boomer generation has had and will continue to have a significant social and economic impact in Canada. Notably, the first boomers turned 65 years of age in 2011, and over the next 20 years this group will expand the number of Canadians over the age of 65 to 23% of the population.
As Canadians age and retire, two of their greatest concerns are receiving quality health care and cultivating their personal savings. It is therefore critically important that all levels of government focus on encouraging Canadians to save and invest to be more financially self-sufficient during their retirement years. By doing so, this will also reduce reliance on public programs and institutional support.
The current and previous governments have taken important actions in this area, including the reduction in the RRIF minimum, a factor that took effect in 2015, and the recently announced enhancement to the Canada Pension Plan. These modifications will help Canadians retain more of their savings, increase future retirement benefits, and protect them from the longevity risk.
With a significant portion of the Canadian population moving into their retirement years, advancing age will drive a corresponding need for increasing long-term care services. The C.D. Howe Institute recently released a report that estimated that the total cost of long-term care will more than double to $140 billion over the next 20 years. The C.D. Howe report concluded that the provinces will need to shift more of the cost of long-term care to those who can afford to pay. This will be an additional retirement financial burden that most Canadians are not currently planning or prepared for. CALU believes that long-term care insurance can play an important role in helping address this funding gap.
Long-term care insurance provides a cash allowance to individuals who are unable to manage the activities of daily living. Greater ownership of this type of insurance is critical in helping to manage private costs associated with long-term care services.
CALU, therefore, urges the federal government to continue to take a leadership position in preparing Canadians for what lies ahead. This could be achieved by educating Canadians about their financial obligations relating to long-term care services, by working with the provinces to develop a more unified approach to determine who qualifies for subsidized access, and by enacting tax rules that will encourage more Canadians to own individual long-term care insurance.
CALU's second recommendation relates to the impact of an aging population on business owners who have built successful family businesses. Small businesses play an extremely important role in the Canadian economy, making a significant contribution to the employment and economic activity of the country. However, it is estimated that close to 75% of current business owners will sell or exit their businesses in the next 10 years, and many may want to pass on their businesses to family members. Unfortunately, existing tax rules can penalize the owner of incorporated businesses who transfers shares to a corporation controlled by other family members. A similar transaction involving an arm's-length purchaser would not result in the application of these rules. As a result, a business owner may be forced to sell their business outside the family to preserve more after-tax proceeds to fund their retirement income.
CALU supports the call for other interested stakeholders to review and amend these rules to permit the transfer of incorporated small businesses to the next generation of family owners on a more tax-neutral basis. We believe this action will facilitate the successful transfer of family businesses, and in turn protect local jobs generated by these companies.
I thank you for your time and attention. Of course, I'm pleased to answer any questions you may have.