Retirement Planning - Federal Budget 2019 changes
Hello, this is an article from last week summarizing some changes in the budget.
What caught my eye was the introduction of Advanced Life Deferred Annuities and Variable Payment Life Annuities
ALDAs will be available for inclusion in RIFs starting in 2020. This will allow Canadians to convert up to 25% of their RRSP assets into a deferred annuity that starts paying out at age 86. Currently, Retirees need convert to a RRIF and start withdrawing (and paying tax) at 71. This opens up an extra 15 years of tax deferral for most individuals, and for those receiving OAS will potentially prevent a lot of clawback because the mandatory withdrawal is based on at most 75% of the total RSP value, not 100%. It also, being an annuity, helps add to the fixed income base for retirees over the age of 85, so combined with CPP expansion should have a significant effect on senior poverty in Canada.
VPLAs are going to be even more interesting, and I suspect, controversial. They are basically tontines. If you're ok gambling on your own mortality, you'll get a lot more bang for your buck, but if you die your heirs get nothing. For the taxpayer, this might be an idea that can incentivize people to stay healthy, reducing strain on our universal medicare system. Afaik, the UBC faculty plan is the only currently operating VLPA in Canada. Details on how it works can be found here: https://faculty.pensions.ubc.ca/files/2 ... uities.pdf.
Any thoughts? If the ALDAs are easily cashable upon death and the return is decent for heirs, I think it's going to be a no brainer for the top quintile of earners who normally depend on RRSPs. VLPAs will allow seniors to insure against outliving their money, at the expense of forfeiting that portion of their estate.