Mr. Speaker, I am pleased to debate Bill C-92 at second reading. The parliamentary secretary well laid out the principal features in Bill C-92. I do not propose to repeat them. He has done an excellent job.
I take this opportunity to put on record my views on an issue that has been raised in my constituency by a number of my constituents, particularly seniors. It is modifications to the RRSP rules, particularly with regard to the lowering of the age at which contributions can be made down from 71 to 69.
There has been much written in seniors publications about this. One need only look at who is offering these publications and these articles. One has to assess what their motivation might be.
An article has been circulating by a former member of this place, Garth Turner. He is suggesting this change is awful, that it will cost anywhere from a $36,000 reduction in the value of an RRSP account for a Canadian.
I want to attempt to explain how one might account for this apparently significant number and why it is very misleading. The maximum contribution under RRSPs is currently $13,500. To the extent that a taxpayer would not be making contributions in either their 70th or 71st year, it means that $27,000 will not be contributed to the plan. Therefore naturally the planned value will not be as high if those capital contributions have not been made.
Second, there would be an additional two years of interest accumulation on all contributions that have been made throughout the contribution lifetime of the taxpayer which would not be accumulating and compounding during those two years.
Of the $30,000-odd that the accounts would be lower, this represents some $27,000 of capital which Mr. Turner, if entirely honest with Canadians and with seniors, would say that although their RRSP account will be lower by $27,000, their bank account would be higher by $27,000 because that contribution was not made.
It is absolutely intellectually dishonest for anyone to suggest that there is this loss of principle simply because it is not in one pocket but in another. We have to look at value of the wealth of an individual in all its forms.
I want Canadians to reflect on what is happening when RRSP time comes around. There is a feeding frenzy of people trying to sell RRSPs. One has to wonder why it is important for them that we buy from this one or that one. There is one very simple reason why they are trying to alarm the public about this. This is when they earn their living. This is when they make these massive commissions on selling.
These commissions are charged through to the funds that we are investing in and passed on to us through management fees and general expenses of the fund management. They have a vested interest in selling more and more simply because it means money in their pockets.
I want the ordinary taxpayer and those seniors watching the proceedings or will read Hansard to know there is another part of the story they have to look at. It is not in the best interest of any taxpayer to see how much money they can put into an RRSP. The real issue is how much can they put in and what plan do they need to get it out with the lowest possible tax consequences.
Many Canadians are fortunate to earn substantial amounts of money which allow them to buy $13,500 of RRSPs and effectively obtain a 50 per cent tax savings as a result of that contribution. If they turn around and purchase an RRSP for a spouse who is not working and come retirement time take their corporate pension and the spouses who are working in the home take out the RRSP moneys, they have effectively split the income and are both paying at a lower rate.
The tax rate at which the contribution was put in was high. The tax rate at which the contribution is paid out is low. There is an automatic windfall in rate. Never mind the savings by the virtue of the fact that they have government money on which they are able to earn investment income. Everybody is entitled to that. High income earners are entitled and have an opportunity to income split or by set up their income averaging annuities in a way that allows them to stream the income out at the lowest possible rates.
The best advice in my view for Canadian taxpayers is not how to get the total amount of money into the RRSP. When it is one's time to go and there is no surviving spouse, the full amount collapses and is taxed in the year in which a taxpayer is deceased at the highest possible rate.
Canadians have to look at their spousal situation. They have to look at their personal health situation and they have to anticipate.
Although I am a chartered accountant I do not propose to give advice to anybody on how to manage their affairs, but I raise these issues for them to ask the questions of people who would suggest that somehow not being able to put money in an RRSP is bad. My own personal view it is best to wonder how to get it in and how to get it out at the lowest possible rate.
On top of that taxpayers should know that once the moneys come out of an RRSP and are taxed in taxpayers' hands at a lower rate they have an opportunity to do something with the cash. One of the best recommendations I had for some family members I have talked to was to help out their family members who do not have the cash flow they need to invest in their own RRSPs so they can start building up and preparing for their retirement income.
When gifts of cash given to family members who are 19 years of age or over there is no income attribution back to the person who gave the money to them. It is important for taxpayers to look at the long term plan of not only building up an RRSP fund and getting a good return but also finding out a strategy on how to stream that money out for the best tax advantage for the family as a whole.
I hope Canadian taxpayers and certainly seniors in my riding will be cognizant of the other questions to ask experts in RRSPs whose only interest is that they want to sell more. They have to ask them: "What is my plan to get that money out? How can I make it work the best for me, for my spouse, for my children and for other family members?" Families do care about the financial health and the physical health of all family members. That is the way it should be.
Mr. Garth Turner and others tend to bring forward rash generalizations about what a terrible thing it is. They have been intellectually dishonest with taxpayers if they suggested the change in years from 71 to 69 took cash from RRSP accounts without saying that it increased cash in their personal bank accounts. That is telling half the story.
Canadians have to know where they are coming from. Canadians have to know why they are trying to push RRSP investments on them. It is because it is in their best interest with the high commission rates they are getting.
I know some would think those are strong words, but every now and then Canadians have to be alerted to the fact that they need the whole story from the beginning to the end to ensure the decisions they make are in the best interest of not only their own financial planning but of the rest of their family members.
I hope this insight into one aspect of the bill will help Canadians to ask questions that are important for them when looking at retirement planning.