Budget 2011: The investor perspective

Investors see opportunities closed in federal budget.



Online only.


Annual Meetings Of The International Monetary Fund And World Bank

While a projected 25% reduction in the budget deficit for fiscal 2010-11 may have given the federal government “wiggle room” to undertake new spending measures beneficial to families and individuals, investors were not so lucky. Indeed, aside from a vague reference to Pooled Registered Pension Plans, some financial literacy announcements and a small positive change to Registered Education Savings Plans, the proposals were focused on curtailing the tax planning activities of investors.

John Hutson, an analyst with Deloitte Canada, was disappointed there were no increases to the thresholds for TFSA and RRSPs. He would like to see the TFSA limit doubled to $10,000 and more scope for making RRSP contributions. “The bigger issue here is getting the middle class to save more for their retirement,” he remarked.

Serge Pepin, director, BMO Investments, focused on the possibility the budget could be overturned in a non-confidence motion. “If the budget is rejected and an election called, it will create uncertainty and the markets hate uncertainty,” he declared.

However, he believes any negative reaction will be short-lived. “Canada will still be seen as fiscally responsible. The budget itself was fiscally responsible and the main opposition party, the Liberals, share the Conservatives’ concern for reducing budget deficits,” he added.

Pooled Registered Pension Plan
The federal and provincial governments are working to introduce a new pension plan called the Pooled Registered Pension Plan, which is aimed at people who typically do not have access to company pensions — notably the self-employed and employees of small- to medium-sized businesses. If it comes to fruition, it will likely be set up as a defined contribution plan.

“We would have liked to have seen more on the Pooled Registered Pension Plan,” said Doug Carroll, VP of taxation and estate planning for Invesco Trimark. “There wasn’t much detail in the budget. We were hoping for more considering Quebec brought down a budget last week that establishes a PRPP for that province.”

Financial literacy
Financial literacy is to be promoted. Of note, the budget announces that a Financial Literacy Leader will be appointed.

The Certified General Accountants Association of Canada applauded the government’s commitment to follow up on the work of the Task Force on Financial Literacy. “CGA-Canada research has shown the importance of financial literacy in resolving issues facing Canadians on escalating household debt,” noted senior communications advisor Stephanie Thatcher.

Income splitting through capital gains
The budget proposes to curtail income-splitting techniques based on capital gains. From the budget text: “These techniques involve capital gains being realized for the benefit of a minor on a disposition of shares of a corporation to a person who does not deal at arm’s length with the minor.” The measure applies to gains realized on, or after, budget day.

Sharing assets in Registered Education Savings Plans (RESPs)
Amendments are planned for RESPs. The intention is to put individual plans on the same footing as family plans when it comes to transferring assets among siblings. Presently, tax penalties and the repayment of grants “may apply to transfers of assets between individual plans unless they occur between plans for the same beneficiary or plans under which the beneficiaries are siblings, generally before the beneficiary under the receiving plan attains 21 years of age.” The amendment would allow transfers regardless of age (as family plans currently allow), provided “the beneficiary of a plan receiving a transfer of assets had not attained 21 years of age when the plan was opened.”

Anti-avoidance rules for Registered Retirement Savings Plans (RRSPs)
Legislative action will be forthcoming to deal more forcefully with tax planning schemes known as “RRSP strips.” These purport to permit RRSP holders to make tax-free withdrawals. The government has successfully challenged these schemes under the Income Tax Act, but they continue to evolve and be marketed to taxpayers.

Review of Employee Profit Sharing Plans (EPSPs)
The federal government intends to review the rules for EPSPs to combat increasing use for purposes other than to align the interests of employees with those of the business. Specifically, there are concerns about the use of EPSPs to direct profits to family members with the intention of reducing or deferring taxes on those profits. Another concern is avoidance of Canada Pension Plan and Employment Insurance contributions.

Changes to Individual Pension Plans (IPPs)

The budget seeks changes to IPPs in two ways. First, once a member turns 72, annual minimum amounts will need to be withdrawn, similar to minimum withdrawal requirements for Registered Retirement Income Funds. Second, contributions for past years’ service will need to first be funded out of a member’s existing RRSP assets (or require reducing contribution room).

22 comments on “Budget 2011: The investor perspective

  1. Pingback: Post budget: the other two solitudes « Mutual Fund Information Center

  2. Pingback: This and That: Budget Commentary, Dividends and more… | Canadian Capitalist

  3. Pingback: This and That: Budget Commentary, Dividends and more… | MoneySense

  4. I understand I’m a bit late in contributing my concepts but this specific post made me feel. They were an absorbing weblog publish. I have get a regular reader of one’s net sites because I stumbled on your site a though again again. I cannot say that I concur with anything you acknowledged nonetheless it was emphatically enlightening! I should probably be back


  5. Transgenic organisms are created when a gene or genes from one organism are transferred to another organism of a different species. For example, a plant such as corn can be transformed by introducing a gene from a bacterium encoding a toxin in order to confer insect resistance for instance. The creation of transgenic plants and animals have many applications. Transgenic plants, animals, and bacteria have the potential to become bio reactors for the mass production of a lot of useful products.


  6. Does every man must be happy in life with what he has been offered. ? I agree with you one hundred percent!


  7. In this grand scheme of things you actually get an A+ for effort. Where you actually misplaced us was first in the details. You know, it is said, the devil is in the details… And it could not be much more true right here. Having said that, let me reveal to you just what exactly did give good results. The authoring is definitely quite engaging and that is probably the reason why I am making an effort to comment. I do not make it a regular habit of doing that. Second, despite the fact that I can easily notice the jumps in reason you make, I am not confident of exactly how you seem to connect your points which in turn make your final result. For right now I will yield to your issue however trust in the future you actually connect the facts much better.


  8. Man I love this post and it is so fabulous and I am definetly going to bookmark it. I Have to say the Superb analysis this article has is greatly remarkable.No one goes that extra mile these days? Bravo. Just one more tip you canget a Translator for your Global Readers .


  9. I wanted to thank you one more time for that amazing web site you have developed here. It’s full of ideas for those who are really interested in this subject, especially this very post. You’re really all actually sweet in addition to thoughtful of others plus reading your site posts is a great delight in my experience. And that of a generous treat! Dan and I will certainly have excitement making use of your ideas in what we should instead do next week. Our collection of ideas is a kilometer long so your tips will definitely be put to very good use.


  10. Pingback: Election results and implications « Mutual Fund Information Center

  11. I am just uncovering this internet site via the Archos product and I can’t obtain the detailed internet site to arrive to be from the positioning to load. we Just assumed you wants to know!


  12. I truly find this is a great interesting subject. Never looked at this subject in this way. If you are planning to create more articles relating to this subject, I definitely will be back in the near future!


  13. Pingback: Election results and implications

  14. I love the effort you put into this blog, very, very in depth, funny, and witty. I wanted to take a look back at all the things I’ve gone through, and tell you: I really wouldn’t have appreciated this without my computer, or my repair buisness that allows me to function. Once again, I truly appreciate you seeing my site, and love what you have up here. Best of luck to you!


  15. I dugg some connected with you post as I thought we were looking at very helpful very useful when I observed this page I went on reddit to share a number of the love with them.


  16. Well, it’s very good, but how about additional options we’ve got here? Do you mind publishing one more article regarding them too? Appreciate it!


  17. An impressive share, I just given this onto a colleague who was doing a little analysis on this. And he in fact bought me breakfast because I found it for him.. smile. So let me reword that: Thnx for the treat! But yeah Thnkx for spending the time to discuss this, I feel strongly about it and love reading more on this topic. If possible, as you become expertise, would you mind updating your blog with more details? It is highly helpful for me. Big thumb up for this blog post!


  18. Greetings! Quick question that’s completely off topic. Do you know how to make your site mobile friendly? My blog looks weird when viewing from my iphone4. I’m trying to find a theme or plugin that might be able to resolve this issue. If you have any recommendations, please share. Appreciate it!


  19. Hey mate, thanks for posting but this page isn’t vewable in Chrome it is showing only half the page.


  20. Hey, I really like your blog. I was wondering if you used a webdesigner or if you created this site yourself. excellent work.


Leave a comment

Your email address will not be published. Required fields are marked *