CANADA - Older workers have been the focus of Budget measures, with a proposal that life income fund holders (LIFs) be given the ability to withdraw funds in certain circumstances.
It proposes that holders of LIFs stemming from federally-registered pension plans be given an expanded ability to withdraw funds in the following circumstances:
• 50% unlocking: Individuals aged 55 and over will be entitled to a one-time opportunity to unlock up to 50% of LIF holdings and transfer that amount to a tax-deferred savings vehicle, which is not subject to the annual maximum withdrawal limits;
• Full unlocking for small amounts: Individuals aged 55 and over with a LIF account balance of up to C$22,450 (US$22,917) will be entitled to fully unlock their account, with the option of converting to a tax-deferred savings plan. The $22,450 limit will increase with the average industrial wage; and
• Full unlocking for financial hardship: All individuals facing financial hardship for reasons including high disability-related costs and low income will be entitled to unlock up to $22,450, which amount will increase with the average industrial wage.
The Budget also increases the income exemption threshold for GIS recipients. GIS recipients currently have their benefits reduced by 50 cents for every dollar of other income received over $500. The Budget will increase this threshold to $3,500 to recognise the average amount of income earned by seniors receiving GIS benefits.
In addition, the Budget provides increased support of $90m to the Targeted Initiative for Older Workers, which assists unemployed older workers in communities with high unemployment. As a result of the new funding, the initiative will be extended to 2012.
Watson Wyatt said a surprise came in the form of a new Tax-Free Savings Account (TFSA). The TFSA gives individual Canadians a way to save while providing tax-free investment income and withdrawals, and can be used as a complement to retirement savings vehicles.
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