How to avoid splitting CPP credits + MORE Sep 23rd

OTTAWA – The Bank of Canada’s governor says today’s era of stubbornly low interest rates means it’s time to revisit retirement plans, temper business investment expectations and encourage policy-makers to pounce on smaller morsels of economic opportunity.
In prepared remarks of a speech he was to deliver today in Quebec City, Stephen Poloz laid out recommendations on how to adapt to low interest rates that he expects will linger for a long time.
Poloz says with Canadians living longer, they should consider saving more for retirement, working longer than planned and changing their investment mix to adjust to the persistently low interest rates.
He also urges businesses to invest more to help the economy, saying the current climate means they must lower their expectations when it comes to rates of return on investments.
The central banker says governments should cobble together a mix of policies to the boost the country’s economic output — even if each opportunity on its own offers only a slight improvement…

Exterior pictures of the GM Oshawa Car Assembly Plant as a 11:59 p.m. strike deadline looms on Monday, Sept. 19th in Oshawa. (Vince Talotta/Toronto Star via Getty Images)

The tentative collective agreement reached between General Motors, Canada and Unifor on September 19 thrust the pension issue, defined benefit (DB) versus defined contribution (DC) plans, back into the public spotlight.

Under a DB plan, workers are guaranteed a specific amount of monthly pension income based on employee/employer contributions and the worker’s years of service. The employer is obligated to ensure the plan is fully funded to meet this pension promise.

On the other hand, DC plans are basically savings plans that do not guarantee a fixed amount of monthly income; they depend on the vagaries of the stock market. The employer has no future obligations with respect to security of retirement income for former employees, which is why bosses fight so hard to convert DB into DC plans.

Recently, Canada Post Corp clashed with the Canadian Union of Postal Workers (CUPW) in a high-profile, year-long and futile attempt to force the union to sell out future employees by accepting a much inferior DC pension plan…

Q: Many years after my marriage failed, my spouse and I finalized our divorce, but we remained on good terms. Can we choose not to split the CPP credits? If so, what do I need to do to make this happen?
—Kate Thorburn, Vancouver
A: Here is one case where doing nothing will get you what you want. (If only this happened when it came to six-pack abs!) What I mean is that unless you file an application with Service Canada, you will not be splitting the CPP credits.
Many soon-to-be-former couples want to split the CPP credits and do the paperwork as a part of their separation. It can make a big financial difference if one spouse was out of the workforce for an extended period. The rules are complex and include some limitations so check out the Service Canada website for details.
If you really are sure that not splitting CPP is the best path for both of you, you have saved yourself some work. But you should go back and check your separation agreement, just in case it mentioned anything about CPP, says Rona Birenbaum, a CFP with Toronto-based Caring for Clients…

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Q: I bought my house in 2010 using the Home Buyers’ Plan (HBP) and my spousal RRSP account. In 2012, I sold the home. Now, I’m planning on buying another home (in 2016). Am I qualified to use my RRSP through the HBP again?
— Using HBP a second time, Edmonton, Alta.  

A: The guidelines for the Home Buyers’ Plan state that you need to be considered a first-time buyer and that means that for the four-year period prior to a home purchase you did not own or occupy a home that you or your current spouse or common-law partner owns.
Given this criteria, you may be eligible to use the HBP again, but it would depend on when in 2012 you sold and when in 2016 you purchase. That’s because the four-year period is very specific—and tends to work out to more of a five-year lapse in homeownership…