BMO Calls For Changes To Pension System

BMO Retirement Institute Report Urges Increased Flexibility For Individual Contributors

    -   RRSPs: Remove age restrictions; increase maximum contribution limits
    -   RRIFs: reduce taxes on returns; lower the rate of mandatory
    -   Broaden tax-free RRSP/RRIF rollover options on death

TORONTO, April 22 /CNW/ - The BMO Retirement Institute released a report today recommending Canadians be given more control over their retirement savings in order to better manage them according to individual circumstances.

"BMO's view is that the personal savings component cannot be ignored when looking at how we can improve the current pension regime," says Tina Di Vito, Head, BMO Retirement Institute, BMO Financial Group. "We believe an approach based on the principle that individuals should have the flexibility to take control of their retirement savings will benefit Canadians and have an immediate positive impact on baby-boomers on the verge of retirement."

The report, Proposals To Improve The Flexibility Of RRSPs And RRIFs, outlines five practical reforms designed to improve both short- and long-term retirement benefits, including:

    -   The removal of age restrictions for Registered Retirement Savings
        Plans (RRSPs). Right now, Canadians must convert their RRSPs by
        age 71. The BMO Retirement Institute believes that Canadians should
        be able to choose when to begin withdrawing money from their RRSPs.
        This will give them more flexibility and allow them to accumulate
        more retirement savings.

    -   The reduction of taxes on Registered Retirement Income Fund (RRIF)
        withdrawals. Only RRSP contributions should be taxed as "deferred
        employment income". The investment returns, however, should be taxed
        at a lower rate that mimics the tax rate that might have been paid if
        the investments had been held outside a registered plan.

    -   The broadening of opportunities for tax-free RRSP/RRIF rollover on
        death. If there are balances in RRSPs or RRIFs when individuals die,
        these amounts should be allowed to be rolled over tax-free into the
        next generation's RRSP or RRIF. If RRSPs or RRIFs could pass untaxed,
        this would be encouragement to keep the funds in a retirement plan.

    -   Lowering the rate of mandatory RRIF withdrawals. The current rule
        forces individuals to make withdrawals from their RRIF whether they
        need the income or not and may deplete RRIFs too quickly. The
        government has an opportunity to extend the life of a RRIF by
        lowering the rate at which funds must be withdrawn.

    -   An increase to the maximum contribution limit for RRSPs. The
        BMO Retirement Institute recommends that contribution limits be
        broadened to be more comparable to defined benefit pensions and to
        offer opportunity for all Canadians to save equally for retirement.

"While we agree the current pension regime does not require a complete overhaul, improvements can be made to the current system to make retirement planning more flexible," says Ms. Di Vito. "By implementing these recommendations, Canadians of all ages and life stages will benefit from a more flexible system that will provide them with more control of their retirement. We believe these proposals, if adopted, would make for a healthier and more tax-efficient pension regime."

While waiting on changes to the current Canadian pension regime, Ms. Di Vito offers the following tips that Canadians can implement now to help ensure retirement planning success:

    -   Maximize your contributions - Ensure your RRSP investments are as
        good as a pension plan by making the largest contribution possible
        each and every year. Currently, RRSP contribution limits are based on
        18 per cent of your earned income from the previous calendar year,
        up to a stated maximum ($22,000 in 2010).

    -   Invest according to your life stage - Take into account your timeline
        when building a retirement investment strategy. In other words, know
        what type of investor you should be. Resources such as BMO's Investor
        Profile website ( can help Canadians determine
        this and provides investment advice and insight.

    -   Know your options - Knowing which investment vehicle will help to
        achieve your ideal retirement lifestyle means determining both short-
        and long-term financial goals. RRSPs are not the only option for
        retirement saving. For example, Tax Free Savings Accounts (TFSAs)
        provide an opportunity to save and invest tax free. Ms. Di Vito
        advises Canadians to speak to a financial advisor about which options
        best align with their individual circumstances and goals.

Full BMO Retirement Institute Report available at:

About BMO Financial Group

Established in 1817 as Bank of Montreal, BMO Financial Group is a highly-diversified North American financial services organization. With total assets of $399 billion as at January 31, 2010, and more than 36,000 employees, BMO Financial Group provides a broad range of retail banking, wealth management and investment banking products and solutions.


For further information: For further information: on the BMO Retirement Institute Report, or to arrange for an interview, please contact: Nini Krishnappa, Toronto,, (416) 867-3996; Sarah Bensadoun, Montreal,, (514) 877-1101

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