Reducing Debt and Increasing RRSP Contribution Limits Priorities for 2004 Budget, says ADVOCIS and CALU

Joint Pre-budget Submission from Canada’s Financial Advisors Presented this Week

Toronto (September 19, 2003) Canada’s largest association of professional financial advisors urged the federal government this week to make a strong commitment to debt reduction and to increase RRSP contribution limits for Canadian saving for retirement. Advocis’ recommendations, contained within its joint 2004 pre-budget submission with the Conference for Advanced Life Underwriting (CALU), also encouraged the government to continue working at improving the current system of policyholder taxation for privately purchased life and health insurance products � a fundamental component of Canada’s social infrastructure.

In their September 16, 2003, presentation to the House of Commons Finance Committee in Ottawa, Advocis and CALU made the following recommendations:

Debt reduction

Advocis and CALU are recommending that the federal government commit to a strategy to reduce the actual amount of debt over the next decade, with any unused portion of the Contingency Reserve and any interest savings resulting from the reduction of the fixed rate portion of the federal debt allocated to debt reduction. Further, the groups recommend that for any given year, no less than 25 per cent and preferably 50 per cent of the surplus should be allocated to debt reduction. Debt reduction has long been a priority of the Association notes Advocis president Steve Howard. “Canada’s population is aging and this will have a serious impact on our country’s health care system,” he notes. “We need to reduce debt today so that funds will be available to meet the resulting future increased health care costs,” he added.

Taxation of life and health insurance

Almost three out of every four Canadians have some form of financial protection through life and health insurance. For this reason, Advocis and CALU are recommending that the government continue to improve the system of policyholder taxation to encourage Canadians to be self-reliant and to protect themselves from financial risks associated with death, disability, illness, and retirement. The submission notes that the existing tax regime
was established 20 years ago and it simply did not contemplate the product developments that have occurred since then. “Were pleased to be part of this very necessary process of improving the current system,” said Howard. “Our goal is to work with the Department of Finance to ensure that the new regulations continue to meet the needs of all Canadians.”

RRSP contribution limits

Both Advocis and CALU have long recommended that the annual RRSP contribution limit should increase to $27,000 and that the registered pension plan defined benefit be increased to $3,000 per year of service. The groups note that Canada continues to significantly lag behind the maximum amount that may be saved in retirement savings plans in the United Kingdom and United States.

Advocis and CALU are also recommending that the age at which RRSPs must be annuitized, or converted to registered retirement income funds, should be raised to 71 from 69 and that consideration be given to raising this age to 73, given the increased life expectancies of Canadians. “Our members have told us that, given the current low interest rate environment, it takes
longer for their clients to accumulate capital,” said Howard. “Allowing an additional two to four years to accumulate capital may make the difference between a financially secure retirement or the need to rely on government programs for some lower income seniors,” he noted.

The complete submission can be found on the Advocis Web site at

CALU, a conference of Advocis, represents members who specialize in advanced applications of life insurance and related financial services.

Advocis is Canada’s largest association of financial advisors, with members in 50 chapters across the country. Advocis members adhere to a strict Code of Professional Conduct, meet ongoing continuing education requirements, and are committed to putting the interests of their clients first. Visit our Web site at