28 - Wednesday. July 4, 1990 - North Shore News BuSsINESS Educate yourself about | BUSINESSBRIEFS | pension, RRSP changes THE NEW pension and RRSP rules have been such a long time coming reform was first proposed in 1979 — we should now summarize the main changes and some planning ideas. I asked John Beaton and Don Smith, both senior vice-presidents and consulting actuaries with The Alexander Consulting Group, for suggestions. (Smith has also acted as an adviser to the federal fi- nance department in developing the new legislation). © Registered retirement savings plan contribution limits jump to a maximum of $11,500 in 1991, then rise by $1,000 a year to $15,000 in 1995. You may con- tribute up to only 18 per cent of your earned income. The limits drop if you belong to a pension plan. ©The 1990 RRSP maximum remains at the old levels of 20 per cent of your earned income: up to $7,500, or, if yeu belong to a pension or deferred profit-sharing plan, up to $3,500 minus any con- tributions you make to the pen- sion plan. @iIf you belong to a pension plan, your employer could estimate (and later in the year Revenue Canada will confirm) how much you may put into an RRSP that year — based on your Previous year’s income and pen- sion plan involvement. @ You may put up to $6,000 of your private pension or DPSP in- come (but not CCP or OAS) into a spousal RRSP each year through 1994, **Use this provision if it makes sense financially — if, for exam- ple, your spouse will be in a lower tax bracket than you are now — Sylv. Better dollars and sense Michael Grenby or perhaps even in the same bracket — when the funds are withdrawn,’’ Beaton said. * You may no longer transfer up to the total amount of all your pensions into your RRSP. (But you may still transfer, within limits, a lump sum pension payout and severance pay into your own RRSP). * If you don’t use some of your RRSP contribution allowance or “room’’ starting in the 1991 tax year, you may carry forward up to seven years’ worth of this “contribution room’? and make catchup contributions later. ®From 1991 on, you may over-contribute to your RRSP up to a total of $6,000. This money will grow tax-free. But if you don't apply future RRSP con- tribution room against this amount, you will be doubly taxed on the over-contribution. e “Use it or lose it.’’ If an RRSP is appropriate to your per- an this summer. crades next fall. sonal finances, plan to make your contribution for 1990, even if you have to take out a short-term loan. Perhaps delay alternatives like paying off debt until next year, when the carry forward pro- visions take effect. * If you are deciding whether to join a pension plan, try to wait until next Jan. 1. That way, you can put up to $7,500 into your RRSP for 1990 instead of only up to $3,500. elf you are self-employed or otherwise can control your in- come, realize you will need $63,889 of earned income this year to make your maximum $11,500 RRSP contribution for 1991, “Such a plan may well offer more tax-sheltering scope than an RRSP,”” said Beaton. ‘‘Jan. 1, 1991, will be the best date to start the plan because you lose all RRSP contribution room the year the plan is set up — and so should get in exchange the credit for a whole year of service in the defin- ed benefit pension plan.”’ © If you are in a public service superannuation plan, ycu should be able to contribute more to your RRSP starting in 1991 ~- ‘‘a total of $2,500 or more for most plans,’’ Beaton said. © If you change jobs and termi- nate a defined benefit pension plan (in whick: the pension is bas- ed on your income and years of service), there will be no adjust- ment to allow you to make an RRSP contribution to compen- sate. Mike Grenby is a Vancouver- based columnist and independent personal financial adviser who will answer your questions as space allows in his column. Write to him c/o North Shore News, 1139 Lonsdale Ave., North Vancouver V7M 2H4. eptember ma) essays, reports and test papers = B| the very thing he’s graded on. It school /) can teach a student to think clear- prepping B| ly, logically and thoroughly and to . write with equal effectiveness. should start in July. y Sylvan Program Benefits: A two-month head start on the fall * MOTIVATION 5| © IMPROVED SELF-ESTEEM * IMPROVED REPORT CARD ¢ CATCH-UP ¢ ENRICHMENT school year can pay worthwhile dividends for students and their |. parents. Think of the year-end teport card as a guide to correcting a leaming difficulty. A few hours a week in a supplementary teaching program — call it a ‘sum- mer camp’ can bring the student up to speed and make the transi- tion to the fall school term easier. 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Some have managed to de- velop their products and bring them to the market while others have their products in the initial stages of development. ten COLUMBIA GINSENG Corp of Vancouver will receive a $907,500 repayable contribution from the Western Diversification Furd to commercially cultivate American Ginseng at Monte Creek near Kamloops, Western Economic Diversification Minister Charles Mayer recently announced. He said the money will go towards the cost of seed, special crop shading and_ technical assistance for the first four years of operation. Total cost of the project is estimated at nearly $7 million. Mayer said ginseng is a difficult crop to grow. It takes three to four years from planting to harvest. The entire crop must be covered with a special shading fabric during the semmer months, and it cannot be grown twice on the same land. The global demand for ginseng root is increasing, Mayer said, faster than the increase in produc- tion. 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