21 November 2020 Posted By : The Canadian Press

Cost to end RRIF withdrawal rule is $1B, PBO says

OTTAWA — A new review by Parliament's spending watchdog says waiving mandatory withdrawal amounts from seniors' retirement savings would cost federal coffers about $1 billion annually.

Each year, seniors with registered retirement income funds have to withdraw a minimum amount from their savings, which is considered taxable income.

The Liberals shifted the marker this year, dropping the minimum for each senior by 25 per cent to ease concerns raised by the effect of the COVID-19 pandemic.

That let those who could afford it leave more money in their tax-sheltered investments, hoping to recoup losses from the pounding the pandemic delivered to the markets.

The parliamentary budget office says cutting the minimum withdrawal all the way to zero would end up costing the federal treasury $940 million next year, rising each year until hitting just over $1 billion in 2025.

Seniors groups had pressed the Liberals earlier this year to waive the minimum withdrawal limit owing to the effect COVID-19 was having on financial markets and retirement savings.

At the time, Seniors Minister Deb Schulte said the government would watch financial markets before making any decisions, since most seniors don’t need to make RRIF withdrawals until the end of the year.

On Thursday, her office said the Liberals would continue to work with lower levels of government to ensure seniors have the supports they need during COVID-19.

Figures the PBO provided for the most recent year available, 2018, show that nearly 2.1 million taxpayers had registered retirement income funds, with an average amount of $114,019.

The average withdrawal that year was $10,645, and 41 per cent of fund holders withdrew above the minimum limit, which is designed to make sure the money is used to fund retirement years.

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