Thank you, Mr. Chair.
My expertise is in retirement income planning. Over the last couple of decades, I've helped to plan the retirement for thousands of Canadians. My clients are fairly representative of the population, but there's one notable exception, which I'll discuss.
There are three things I want to draw your attention to today: seniors benefits, the tax-free savings account, and registered disability savings plans.
When we talk about seniors benefits, we're looking at the expansion of the Canada Pension Plan. I've heard some people say that this would help address seniors poverty, but I don't agree with that. By increasing the CPP benefits, we aren't specifically targeting people in need; rather, we're increasing benefits for all Canadians who contribute to the plan. When it comes to addressing poverty, people of modest means are not making the same contributions to the CPP.
The other thing that I think isn't getting perhaps as much attention is that there isn't any free lunch here. The expansion of the CPP is going to increase payroll taxes, we know that, but specific to the consideration of this committee, we're increasing payroll taxes on the working poor as well. Even further, we're increasing payroll taxes for the employers of the working poor. The jobs of the working poor would be most affected by this. If somebody has a skilled occupation, maybe an engineer with a healthy six-figure income or something like that, that person probably isn't going to see their job in jeopardy from an increase in payroll taxes. It's another story altogether when we're looking at people who are at the margin.
While expanding the CPP might have an appeal, it also forces people, including the working poor and their employers, to pay more taxes now, and there's an opportunity cost to that. This isn't a small matter. More than half of Canadians are already in difficult financial circumstances, so they don't need additional payroll taxes reducing their take-home pay even further. Right now we have too many Canadians who are already living paycheque to paycheque.
I think the biggest issue of all when it comes to the Canada Pension Plan, and specifically for this committee, is that it's not the right program to address seniors poverty issues. It's the guaranteed income supplement we need to look at. That's the one that's targeted for low-income seniors, not the CPP, and I don't hear the same level of discussion about the guaranteed income supplement.
This is something that will pay about $860 per month to low-income seniors, but it's reduced by one dollar for every two dollars of annual income above $3,500, and it's eliminated altogether for any single senior with an income above $17,304. If what we want to do is look at the issues around seniors poverty, then perhaps increase the income level before the GIS clawbacks begin, maybe increase the cut-off income level where benefits are lost completely, or perhaps reduce the percentage of the clawbacks. Some combination of these would be better at targeting the issue of seniors poverty without the same unintended consequences of the CPP changes.
The second topic I'd like to raise is the tax-free savings account. We recently saw the TFSA contribution limit reduced. It's my understanding that it was based on an assumption that TFSAs were primarily used by the wealthy, but the evidence just doesn't support that. TFSAs have been used, and remain to be used, by Canadians with all sorts of income levels, and to reduce the options for people to plan for their future is not, to my mind, the right approach. Where possible, we should be encouraging people to be more self-sufficient and less dependent on government benefits.
It's good policy to allow people to plan for their future with a minimum of impediments. The reality is that what might seem like a lot of money as a lump sum really isn't if what you need to do is stretch that money out over a lifetime. For a married couple at age 65, there's a 72% chance that at least one of them will live to age 85. A person might have even $250,000 saved up, but that's really not that much money if you have to stretch it out over a quarter of a century or more. It's even less of a nest egg if you factor in inflation. Even with modest inflation, it's very likely that we could see the cost of living double while a person is retired.
Given all of this, I'd like to see the annual TFSA contribution room returned to $10,000, with indexing for inflation to allow people to better prepare for the future.
My final discussion point is in regard to the registered disability savings plan. I mentioned at the outset that my clients are pretty representative of average Canadians with one exception: I have very few disabled clients. The reason is that any prolonged medical condition is bound to have severe financial consequences. First people lose their health. Then they lose their wealth. So we have registered disability savings plans, but really they're not well utilized.
I think there are two reasons why the uptake on RDSPs has been underwhelming. One of the things is that RDSPs are complicated. Their literature is confusing and hard to decipher.
I think the bigger issue is that there are some restrictive rules that accompany RDSPs. There are rules on when you can open an account, when you can take money out, how much you can take out, how much grant money you'll receive, and, probably most important, how long you have to leave the money alone before you're eligible to retain the grant money. That's the real sticky point.
If a person needs to take some money out that has been in the fund for less than 10 years, then they're going to have to repay the government grants and bonds that were contributed to the account over the last 10 years at a ratio of three dollars of government grants and bonds for every one dollar withdrawn from the account. Simply put, leaving money untouched for 10 years just isn't consistent with the realities of living with a disability. I think there's a tremendous need for the idea of the RDSP, but I also think we can improve on the implementation.
In summary, I think we should focus on the right tools for the job. We should allow people to make the best choices for their unique circumstances, and to me that means focusing on the guaranteed income supplement rather than other seniors benefits. I believe the TFSA annual contribution room should be returned to $10,000 per year, and I think that registered disability savings plans need a major overhaul to make them more transparent and more accessible.
I'm happy to elaborate on these points or to speak to any other financial planning topics you wish to discuss. Thank you.