Currently, most Defined Contribution (DC) pension plans are not permitted to pay a retirement income to their members. At retirement, members must use the money in their DC pension account to purchase an annuity or transfer it to a locked-in group or retail investment product.
In February 2004, the federal Department of Finance released – for comment – draft amendments to the Income Tax Act’s regulations. These amendments, in particular section 8506(1)(e.1), will allow DC pension plans to pay variable retirement income, much like a registered retirement income fund (RRIF). The consultation period for these draft amendments ended on April 30, 2004. It is believed they were favourably received by the DC pension sector.
Action to date
In May 2005, the ACPM’s Advocacy and Government Relations Committee (AGRC) wrote a letter to Finance Minister Goodale encouraging the government to enact the amendments. They have since been enacted but provincial legislation must now be changed.
The AGRC will continue to monitor this issue.