weer 48 ~- Wednesday, December 20, 1989 - North Shore News PENSION REFORM Change RRSP strategy NO WONDER Ottawa is taking years to pass its RRSP and pension reform changes — what with all the other tax and political considerations on its platc. Also. the proposals are so com- plex, the government now needs almost 600 paves of documenta- tion to explain thea. This latest information package was released when Finance Minister Michael Wilson introduc- ed the proposed changes this month -— changes the federal zov- emment first praposed in 1984. Even now, the new rules are not yet law. You will be happy with the new rules if you don't belong to a pen- sion plan, or if you receive pension income and have a spouse in a lower tax bracket. You will be happy with the new rules if you live mainly on your pension income. Here are highligits of the changes. Mark those that relate to your situation and clip the column. Then contact your financial ad- viser or the RRSP expert at your financial institution to help you devise the best strategy. * LUCKY CHILD. If you have no spouse when you die, you may leave your RRSP to a dependent child or grandchild under 26 and have the child declare the income without limit. (The former limit — $5,000 for every year under 26 — has been removed.) If the child is under 18, the money may be used to buy an an- nuity to spread out payments until the child is 18, further reducing the tax. *OLD LIMITS. The RRSP contribution limits for 1989 and 1990 remain unchanged: 20 per cent of your earned income to a maximum of (a) $7,500 if you do not belong to a pension plan, (b) $3,500 (minus any contributions you make) if you do belong to a pension plan. *NEW LIMITS. In 1991], th: maximum jumps to $11,500 ana rises by $1,000 a year until 1995. Then the maximum wiii be index- ed. But starting in 1991, you will be able to contribute up to only 18 per cent of your earned income. * PENSIONERS LOSE. Until now, you have been allowed to put up to the total of all the pension payments you receive each year in- to your own RRSP. Unfortu- nately, 1989 will be the last year, although the contribution deadline is stil] March 1. Note: if you leave a job. you may still transfer your pension — the lump sum you have ac- cumulated —- directly into your own RRSP. * SPOUSES WIN. You may put up to $6,000 a year of your private (former employer’s) pension pay- ments (but not CPP or OAS) into your spouse’s RRSP from 1989 through 1994. That's a great way to save tax if your spouse will be in a lower tax bracket than you when the RRSP funds are withdrawn or will need to create pension income to claim the $1,000 pension income amount. This approach pays off even if your spouse will be in the same bracket, because the money in the RRSP can grow tax-free — and for a longer period if your spouse is younger than you. *BIG CUTBACK. If you belong to a pension plan but your employer makes all the contribu- tions, you may now put up to NOATH VANCOUVER £86-6388 WEST VANCOUVER 926-5541 $3,800 into an RRSP. Starting in 1991, you might find vourself cut back to as litle as $600. * SAVE TT. Starting with the 199F tax sear, you may make fess dollars and sense Michael Grenby than your minimum RRSP con- tribution and carry forward up to seven years that unused ‘‘contribu- don room." You may then make eatchup contributions in future years. This will be helpful if vou first want to pay off expensive debts or save to buy a home, for example, or expect to be in a higher tax W CHRISTMAS COUNTERATTACK DECEMBER 8 — JANUARY 3 We stop a lot more than 400,000 vehicles during our Christmas Counter- Attack roadchecks. We stop drinking drivers. bracket in the future so the RRSP deductions then will save you more tax, * GET A RAISE, Your income and pension plan situation in 1990 will determine your RRSP con- tribution limit for 1991, If vou do not belong to a pension plan, you will need carned income of almost $64,000 in 1990 to make the max- mum 311,500 RRSP contribution in 1991, “This latest move by the gov- ernment indicates that the legisla- tion will become a reality,’’ said Don Smith, senior vice-president of The Alexander Group, con- sulting actuaries. Smith, of North Vancouver, has acted as an adviser to the federal department of fi- nance in developing the new Iegis- Jation. ‘‘Tabling these changes provides assurance about many areas over which some uncertainty existed. “The legislation will probably be passed into law next spring. But people can treat this as a clear and firm indication of the govern- ment’s intentions."” Smith urged people to learn about all the details of the new law so they can plan their personal fi- nances more effectively. une Mike Grenby is a Vancouver- based columnist and independent personal financial adviser; 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, A program of tne Government of British Coiumbia ICBC + HOLIDAY GARBAGE PICKUP THE CORPORATION OF THE DISTRICT OF WEST VANCOUVER Your garbage pickup day will be delayed for 2 days during the Christmas holiday week and for 1 day during the New Year holiday week. in ac- cordance with the following schedule: NORMAL PICKUP DAY Mon., Dec. 25 Tues., Dec. 26 Wed., Dec. 27 Thurs., Dec. 28 Mon., Jan. 1 Tues., Jan. 2 Wed., Jan. 3 Thurs., Jan. 4 B.A. Lambert HOLIDAY PICKUP SCHEDULE Wed., Dec. 27 Thurs., Dec. 28 Fri., Dec. 29 Sat.. Dec. 30 Tues., Jan, 2 Wed., Jan. 3 Thurs., Jan. 4 Fri., Jan 5 Dir. of Operations WARNING: ATTHIS RATE YOUR NEIGHBORS MAY TURN GREEN WITH ENVY. 11.50” 33-MONTH MORTGAGE* Prenor Tr ust’s new 234nonth closed mortgage means a lot of good things. And one bad thing. H your neighbors find out about the low rate you're paving, they just might not talk to vou anymore. Our homeowner mortgages are designed to help vou pay off your biggest investment in away that is best for you. You can pay of f 15% of the principal once a year. Or perhaps vou'd like to increase Vour mortwage payment by 15% atany one time durtag each year of your mortgage. Either way, there’s no prepayment bonus or other cost lo vou. tn addition. you can use our Portable Mortgage Option to transfer your existing loan balance for ihe remaining term to vour new home. In fact, ifthe purchaser wants to assume your existing mortgage, it could actually help you sell your home faster. Sc come to Prenor Trust and take advantage of this great-rate mortgage opportunity. Just remember not to tell your neighbors. * Residential owner-occupied properties only. Financing subject tocredit worthiness, Rates subject to change without notice. ‘J Main Branch 595 Howe St. 662-030 2118 W. dist Ave PRENOR [RUST North Van 1452 Lonsdale 980-7440 West Van 1718 Marine Dr. 926-3020 Kerrisdale 264-2787