Ottawa’s policies to blame for pension shortfalls, says tax lawyer

With many Canadians drowning in debt, tax expert Trevor Parry believes the federal government’s policies discourage saving

Ottawa’s policies to blame for pension shortfalls, says tax lawyer
Canada’s household debt now exceeds its GDP and it’s a major worry for the nation’s decision-makers. According to tax lawyer and insurance advisor Trevor Parry, much of the responsibility for this dilemma can be placed at the feet of Justin Trudeau and his predecessors in Ottawa.
“Canadians don’t save enough and it’s a huge problem,” says Parry. “The federal government has taken policy decisions that deter people from saving. I like the World War II mentality where everyone understood sacrifice and the need to save and invest in a great project. We have lost that.”
This aversion to saving is particularly troubling when it comes to Canada’s pension system. As president of his own consulting firm, a large part of Parry’s day is spent guiding advisors on different retirement strategies. An advisor himself in a former life, he strongly believes the Canadians that are preparing for the future are in the minority.
“Private sector pensions have declined phenomenally in the last decade,” he says. “As a rule of thumb, everyone should try to save 10% of their net income every year for retirement. The vast majority of Canadians contribute nothing to their RSSP, yet it is a great structure – much better than in the United States.”
While Parry holds the RSSP in high regard, that’s not to say it can’t be improved upon, and that’s exactly why he is currently high on the individual pension plan he calls: “Pension in a Box.”
The product allows for business owners and incorporated professionals to save for their pensions just like government employees. In the past, individual pension plans were derided as too complex by many financial professionals, so Parry is now bringing a simplified version to Canada’s advisors. 
Canada’s pension shortfall is an issue that will only increase in importance as the country’s demographic shift really starts to take hold and more and more baby boomers retire. As a result, reform of the CPP has been a key policy goal for the Liberals since taking office last year. Now that the provinces are coming on board, it appears Canada will have an updated pension plan before too long, but this is little more than putting a band-aid on a gunshot wound, in Parry’s opinion.
“It’s utterly unnecessary,” he says. “Successive governments have encouraged people to spend and not save and then taxed them to ridiculous levels. The answer is not to double-up on the CPP.”
Instead, he argues that increasing incentives to save within the current framework would be a much better solution to address Canada’s looming pension chasm.
“One thing I would love to see them do is allow for the sale of unused RSSP credits,” says Parry. “If you have people that are paying higher taxes that want to save and receive a tax credit, they should be allowed to buy RRSP credit from lower earners that don’t use them. But it’s the kind of free-market thinking that is anathema to this government.”

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