Current Trends and Issues in Financial Planning 2009

							Current Trends and
     Issues in
Financial Planning:
       2009
The Economy
             Economic Update—Outlook for Canada

• despite signs of recovery (i.e. the ‘green shoots’),
  in April, the Bank of Canada stated the global
  recession has intensified and there has been
  weaker than anticipated activity in all major
  economies
• expectations are that the Canadian economy will
  contract by 3% in 2009
• Canadian exports fell in the fourth quarter of
  2008
• household spending declined; savings increased
             Economic Update—Outlook for Canada
• while better positioned than the U.S., recovery in
  Canada will be delayed and will be more gradual
• recovery will be tied to:
   • the monetary policy of the Bank (e.g. quantitative
     easing)
   • Canada's sound financial system and
   • the relative strength of the balance sheets of
     Canadian banks and Canadian households
• core inflation will decline in 2009
• Canadian dollar should remain relatively strong
               Economic Update—Outlook Globally
• poor prognosis globally given declining wealth and
  bank balance sheets, a weak U.S. residential market
  and a faltering automotive sector
• one bright spot is China as it is still growing albeit, at
   a slower rate
• Bank of Canada anticipates negative growth in 2009
  with a more positive outlook in mid-2010
• global financial markets are showing signs of a turn
  around despite tight credit
• Bank of Canada remains negative on the banking
  system until 2010
Retirement Planning
                Saving for Retirement as a Goal
• in 2006, saving for retirement and home ownership
  were the top priorities for Canadians:
  – 2/3 of Canadians were saving for retirement
  – 2/3 of Canadians between age 35 and 54 and nearly
    1/ of Canadians between age 18 and 34 were planning
      2
    for retirement
  – 62% of Canadians between age 18 and 34 had an
     RRSP
• 2/3 of those who set retirement savings goals felt
  they were well ahead or almost exactly where they
  thought they should be
                 Saving for Retirement as a Goal
• in the RBC Retirement Study of April 2009,
  reducing debt is among top priorities for baby
  boomers
• 50% of boomers have changed their view of
  retirement:
   • 26% feel they may have to work longer than expected
   • 20% believe they may not be able to live the lifestyle
     they thought they would in retirement
   • 14% feel they will need to do more retirement planning
                  Review of Canada Pension Plan
• current contribution rate of 9.9% to be maintained
• proposed changes to be phased in between 2011
  and 2016 include:
  – greater flexibility to receive benefits while still working
  – eliminate requirement to wholly or substantially cease
    working
  – retirement before age 65: annual reduction of 36%
  – retirement after age 65: annual increase of 42%
  – number of low earning years dropped increased to 8
    years
Personal Financial
     Update
                  Personal Financial Update
• unemployment rate hit 7.7% in February 2009




• increase in the application for EI benefits
• increase in personal bankruptcies
                   New Credit Card Regulations
• Credit Business Practices Regulations will:
   – mandate a minimum 21-day, interest-free grace period
     on all new credit card purchases when outstanding
     balance is paid in full
   – lower interest costs as payments must be allocated in
     favour of the consumer
   – require express consent of consumer for credit limit
     increases
   – limit debt collection practices
   – prohibit ‘over-the-limit’ fees directly due to holds placed
    on the credit card by merchants
                   New Credit Card Regulations
• Cost of Borrowing Regulations will:
   – provide clear information through a summary box that
     will set out key features (e.g. interest rates and fees)
   – provide information on the time it would take to fully
     repay an outstanding balance based only on minimum
     payments being made every month
   – mandate advance disclosure of interest rate increases
     even if this information had been included in the credit
     contract
• Finance Minister, Jim Flaherty, refused to cap
  interest rates on credit cards
Income Tax Update
               Highlights of the 2009Federal Budget
• increase of SMABUD limit to $500,000
• increase of the top dollar threshold for the 2 lowest
  federal tax brackets by 7.5%
• changes as they relate to housing:
   – increase of HBP withdrawal limit to $25,000
   – introduction of the $5,000 First-time Home Buyers’ Tax
     Credit
   – introduction of the temporary Home Renovation Tax
     Credit
• ability to use post-death RRSP / RRIF losses to
  offset income inclusion in the year of death
Investment Planning
            Registered Disability Savings Plan (RDSP)
• effective December 2008, the RDSP helps families
  save for a loved one with a disability
• eligibility is based on being able to claim the
   Disability Tax Credit (DTC)
• RDSP is modelled after the RESP with a lifetime
  contribution limit of $200,000
• contributions can be made to the end of age 59
• contributions may attract Canada Disability Savings
  Grant and Canada Disability Savings Bond
         Registered Disability Savings Plan (RDSP): CDSG
• maximum CDSG of $70,000 or to age 49
• for 2009, if net annual family income is below
  $77,664, CDSG is:
  – $3 for every $1 of contribution (i.e. 300%) on the first
    $500 contributed plus
  – $2 for every $1 of contribution (i.e. 200%) on the next
    $1,000 contributed
• if net annual family income exceeds $77,664, CDSG
  is $1 for every $1 contributed up to $1,000
  Registered Disability Savings Plan (RDSP): CDSB & RDSP Payments
• maximum CDSB of $20,000 or to age 49
• for 2009:
  – if net annual family income is below $21,817, CDSB is
    $1,000 with no contribution required
  – if net annual family income is between $21,817 and
    $38,832, a partial CDSB is paid
• funds can be withdrawn at any time however, if
  withdrawn within 10 years of a CDSB or CDSG
  payment, the CDSB or CDSG must be repaid
• income and CDSB or CDSG is taxable to the
  beneficiary
   Registered Disability Savings Plan (RDSP): Change in Circumstances
• if RDSP beneficiary can no longer claim the DTC:
  – RDSP must be closed by the end of the calendar year
    following the first full calendar year the beneficiary is no
    longer eligible
  – CDSGs or CDSBs received within 10 years repaid
  – remaining funds, less principal contributions, is taxed in
    the hands of the beneficiary
• if RDSP beneficiary dies:
  – RDSP must be closed by the end of the calendar year
    following the year of death
  – CDSGs and CDSBs received within 10 years repaid
  – remaining funds payable to the deceased’s estate
              Tax-free Savings Accounts (TFSAs)
• candidates for and uses of the TFSA:
  – ‘rainy day’ fund
  – for low income individuals
  – individuals who have maximized RRSP contribution
    room
  – parents who wish to help adult children
  – savings vehicle for a future large expenditure
  – couples with disparate incomes
  – parents saving for child’s education
  – individuals with fluctuating incomes
  – individuals expecting large tax liability on death
                   Single Securities Regulator
• Expert Panel on Securities Regulation, led by the
  Honourable Tom Hockin, released its final report
  titled Creating an Advantage in Global Capital Markets; it
  also proposed a draft securities act
• central recommendation is the establishment of a
  single national securities regulator administering a
  single federal securities act
• decentralized national regulator—the Canadian
  Securities Commission—with one head office but with
  several powerful regional offices
• some provinces oppose recommendation
Professional Practice
               National Do Not Call List (NDNCL)
• effective September 2008, NDNCL applies to
  telemarketers
• solicitation: the act of selling or promoting a product
  or service or requesting money or 'money's worth‘
  directly or indirectly
• Unsolicited Telecommunications Rules include:
   – restrictions on the time-of-day calls can be made
   – calling protocols and
   – cover the use of Automatic Dialing and Announcing
     Devices
             National Do Not Call List (NDNCL)
• companies who have done business with a
  consumer in the last 18 months, can call that
  individual even if registered on the NDNCL
• after 18 months since the last transaction, this
  exemption expires unless the consumer consents to
  further calls
• you can register your organization online at:
  http://www.LNNTE-DNCL.gc.ca
• violation could result in a penalty of up to $1,500
  for an individual and up to $15,000 for a
  corporation per infraction
                    Acknowledgement
•Thank-you to the CIFP Education Committee:
  • Paul Griffin (Committee Chair)
  • Don Nilson
  • Wilf Pelletier
  • Steven Warden
  • Barbara Trieloff-Deane
  • Patrick Longhurst
  • William Jack
  • Brent Rolfe
  • Marion Weisgerber
• from CIFP, thank-you to Robert Jeffrey