Now’s time to shield RRSPs from creditors
Written on May 24, 2009
It’s getting rather late, but this province still has time to provide the sort of creditor protection for registered retirement savings plans that already exists for pension funds and RRSPs in six other provinces.
What better time to secure future retirement income than during a recession, before unemployment increases. What better time than after it became obvious yesterday that government loans will go to prop up General Motors of Canada pensions – not a politically popular move. Currently, RRSPs are protected in Ontario and three other provinces only if things get desperate, and the saver moves swiftly to declare bankruptcy.
Until then, a borrower can either volunteer to cash registered savings to pay debts, or face a court order to give them up.
Yet, as of yesterday, it was far from clear whether a private member’s bill aimed at protecting RRSPs will be moved along to enactment, despite support from Liberal, Conservative and NDP politicians.
"I couldn’t really tell you either way at this point," said Monique Smith, the Liberal house leader and minister of tourism. "It is a topic of conversation among the house leaders at this point."
House leaders are to meet Tuesday to discuss which, if any, private member’s bills will be referred to committee for more active consideration.
Smith said she would personally support creditor protection for RRSPs, but she could not voice that support in her capacity as house leader or minister.
A bill proposed by a private member could be discussed in the fall if it doesn’t make it onto the summer agenda. She said a decision has not been taken to end the current session of legislature in June, which would kill all unresolved bills.
Elizabeth Witmer, Progressive Conservative house leader, was less than optimistic about the prospects for Bill 96, urged by Jeff Leal, Peterborough’s Liberal MPP guaranteed cash advance loan.
His bill, modelled on legislation passed in Manitoba, was given second reading last October with the enthusiastic endorsement of members of all parties.
"This is about trying to do something for the ordinary citizens of Ontario," Leal said yesterday, noting that only 35 per cent of Ontario residents belong to a pension plan.
But Witmer said "it doesn’t appear they are motivated to pass this bill before June 4 (when the legislature is scheduled to recess for the summer)."
"The decision to move it ahead would in many respects be influenced by the minister of finance (Dwight Duncan)," she said. If the government wanted to move the bill ahead swiftly, "we would have had a discussion by now."
Leal’s bill is so far off the radar screen for major creditors that a spokesperson for the ever-vigilant Canadian Bankers Association has yet to research a formal position.
The financial implications of the bill do, however, set it apart from the typical private member’s bill that governments might agree to pass, said Witmer.
Meanwhile, there is a certain irony to the revelation yesterday by autoworker union president Ken Lewenza. He said billions of the near $5 billion in provincial and federal government loans sought by General Motors of Canada Ltd. would be "filtered" into GM’s drastically underfunded pension plan.
That money would then be protected from creditors, including the governments seeking repayment of those loans, if GM were to fail despite the bailout.
The only edge governments would have over other creditors is the taxes they would collect from the pensioners.
jdaw@thestar.ca
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