Pension/R

re

WHAT QUESTIONS are people asking about the recent
pension and RRSP rule changes? And what are the an-

swers?

Peat Marwick Thorne,
chartered accountants, has taken
on several private contracts to an-
swer guestions about pension’
RRSP reform.

“We have been getting as many
as 150 calls a day,’” said Judy
Rothwell, director of personal ad-
visory services.

Here are some of the typical
questions — and answers.

“" belong to a pension plan at
work. How much can I put inte
my RRSP this year and when can
I contribute?"

Your RRSP centribution for
199f is based on 18% of your
earned income in 1990 (to a max-
imum of $11,500) minus your
1990 pension adjustment. The PA
should be indicated on your 1990
T4 slip — you have a copy with
your tax papers.

(To calculate earned income,
add gross employment income in-
cluding taxable benefits, self-
employed income, business or
partnership income, rental in-
come, alimony and maintenance
received, and royalties and
research grants.

(Then subtract self-employment,
business or partnership and rental
losses, alimony and maintenance
paid and employment related ex-
penses like union dues and deduc-
tible travel expenses.)

Let's say your earned income in
1990 was $50,000 and your PA
was $5,250. Subtract the $5,250
PA from (18% of $50,000) $9,600
and you may put $3,750 into an
RRSP. Concribute between now
and March 1, 1992, if you want to

PERSONAL BANK!NG ONLY
RATE SUBJECT TO CHANGE

A

NMG,

F Citizens Trust |

Michael
Grenby

DOLLARS AND SENSE

claim the deduction for the 1991
tax year.

“I had a good job in 1990 so in
January of this year, { put
$11,500 into my RRSP for 1991.
But then 1 fost my job and it
Jocks like £ might not have any
taxable income this year. So my
RRSP contribution will be wasted.
What can I do?”’

Under the new riles, you do
not have to claim an RRSP con-
tribution in the year you make it.
You may carry it forward as long
as you have RRSP contribution
room avaiiable,

So even though you have al-
ready put the mongy into your
RRSP for 1991 ~- based on your
earned income last yeer — you
don't need to claim this contribu-
tion for the 1991 tax year.

5 YEAR
TERM DEPOSIT

983-3773

Lonsdale Quay
Next to Seubus
North Vancouver
24 Hr. Quote Line 652-4636

MEMBER CANADA
DEPOSIT INSURANCE CORPORATION

INSURED

NNUTTES
Are you or sour parents over 65 and looking to

increase disposable income?
Would you like to eurn an equivalent pre-tax vield of

11% to15%

ScotinMeLead wants to intraduce sou tour
investment vehicle hat

° provides high monthly incone
¢ mininzizes Income taves
» provides for sour estate

*hayed on sour age. tan bracket & teat

For your complimentary brochure call:

661-7442

ADDY w% _.
cb

AL CGHDE

JUSEN Nae

Served, Bax MIA,
VIN Fe

instead, you could carry for-
ward this deduction and use it in a
year when your income is back up
{to its normal level.

Let's say you do end up with a
jeb later this year. But your tax-
able income totais fess than
$29,000. If you claim your RRSP
deduction, you will save tax in the
lowest tax bracket.

Instead, if you are back up in a
higher tax bracket in 1992, you
would save more tax by delaying
your claim until the 1992 tax year.

Note that carrying forward your
claim won't affect your deduction
for 1992. So you could deduct the
$11,500 and also make another
contribution for 1992 based on the
earned income you did have in
1991.

“I have just changed jobs and
must decide what to do with the
pension from my old job — either
take a pension when I eventually
retire or transfer the vaiue to a
locked-in’ RRSP. What is a
locked-in RRSP?”

Acetaminophen
19

ea
GST included
Extra strength-100's
Reg. §.13. GST incl

Answer Now—1 Test

10” ..

GST inciuded
Rieg. 14.97 GST inch

NORTH VANCOUVER

| _925-MARINE DRIVE 988-6311

ave
up to

In A Wink

Neutralizing rinse
or disinfectant.
3609 mL.
Reg. 6.59

6°.

GST included
1090's. Reg., wiiren
or wizinc.

Reg. 10.59

GST incl.

Tylenol Sinus - 24’s
eels” E98
Saie

GST inctuded

WOOLCO PRICES INCLUD

CAPILANO MALL

Wednesday, June 26, 1991 — North Shore News - 55

reform raises many questions

than a defined benefit
plan (one whose pension is paid
according to length of service and

The money in a locked-in RRSP
may be taken out to buy only a
life annuity contract. In effect,
that’s the same as taking a pen-
sion, but you may shop around to
find the most conipetitive and ap-
propriate annuity.

Also, depending on the terms of
Pension and so the locked-in
RRSP, the money might not be
paid out before the norma!
retirement date. However, you
could delay taking the money until
age 71 (if you didn’t need the ex-
tra income, for example, or were
waiting for higher rates).

In the meantime, you can
manage and invest the money in
your locked-in RRSP just as you
can in a normal plan.

“With the new rules allowing
higher RRSP contributions,
should I join the pension plan at
work???

For younger individuals (20 to
45 years old), especially those like-
ly to change jobs several times, an
RRSP is probably a better choice

490

Sensitsl or

Reg. 799 ea.
GST included

Hours:

Saturday
Sunday

Save up to 2”
Ramees Condoms

gon lubricated. 99

—

E THE 7% GSN.

Monday ta Wadnesday
Thursday and Friday

New Auto Hours:

pension

the
the

earnings) — provided
employee will indeed put
money into an RRSP.

Joining a defined benefit plan
restricts RRSP contributions. And
if the employee doesn’t stay long,
he or she receives little or no
benefit from the plan — and has
given up the chance to make
larger RRSP contributions.

On the other hand, a ‘‘money
purchase’’ pension plan = simply
pays a pension based on the funds
in the plan at retirement. These
funds can be transferred if the
employee changes jobs.

Mike Grenby is a Vancouver-
based columnist and independent
financial adviser who works with
individuals; he will answer your
questions as space allows in his
column — write to him c/o North
Shore News, 1139 Lonsdale,*
North Vancouver, V7M 2H4.

|

Discover Valuable
Savings For All
Your Persona! Needs

off our entire
line of
PRESUN
in SPF 45, 29

and 39.

*Off our reg. prices

125’s
10g. Entvophen

59

25% bonus.
125 iablets for the
price of 100.
Reg. 8.53. GST ine!

Save 1”
Merit Viamin E

400 1.U.
100s a
Reg. 4.98 ea.

GST included

10am-Gpm
Wam-Spm

9:30-6pm

12 noan-Spm

Open 7am, Mor.-Feb.

A a