February, 2010 

Volume 3, Issue 2

 

 

In This Issue

 

 

MFG FINANCIAL DISPATCH

A Monthly Publication of MacIntosh Financial Group Ltd.

Celebrating 25 Years of Serving Our Clients

 

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Win One of Two $25 Starbucks Cards

 

Corporate Class Mutual Funds

Canada Pension Plan Basics

Bits and Pieces

 

Win One of Two $25 Starbucks Cards

As we are in the habit of doing, we’re giving away a $25 Starbucks card to each of two lucky people in February. 

If you would like to be one of our winners, simply click on the word “WIN”, and answer the four multiple choice questions based on information in the articles in this newsletter.  We’ll randomly draw two names from the correct entries and award a card to each of those two people.

Last month’s winners were Sandy Haskett and Don Olson.  Congratulations to both of you.  This month’s draw will happen on February 16th.  All the best!

 

 

 

 

Corporate Class Mutual Funds

“Corporate class” is a term used to describe a mutual fund structure that helps you make tax-efficient investments outside of a registered account (RRSP, RRIF, TFSA, etc.). Unlike typical mutual funds, which are set up as trusts, corporate class is a mutual fund line-up set up under the umbrella of a corporation.  Each fund offered represents a class of shares in the corporation.

You can switch from one fund to another as your circumstances change, without immediate tax consequences. You are generally only taxed when you take your assets out of the corporation, that is, redeem your investment.

In addition to tax-deferral, corporate class shares may also allow you to pay less tax on an ongoing basis.  You may receive distributions that are taxed more favourably than in a traditional trust structure as the only distributions will be dividends or capital gains.  In traditional trust funds, distributions including interest may be generated which receive less favourable tax treatment.

Within registered accounts, taxes are already deferred until money is withdrawn in the case of RRSPs or RRIFs and taxes are never incurred in the case of TFSAs.  For these accounts mutual fund trusts are appropriate.  But for a non-registered account, generally corporate class shares are the preferred structure.

Corporate class funds have been in existence for several years now and a large percentage of funds are available in either corporate class or mutual fund trust structures. However not all funds with each mutual fund company are available in corporate class and so the benefits of corporate class need to be weighed against other considerations in constructing a portfolio.  

For more information regarding corporate class shares and whether they are appropriate for your portfolio, please contact our office. 

 

 

 

 

Canada Pension Plan Basics

We often talk with people who don’t understand Canada Pension Plan (CPP) and how it works so we thought we would try to cover some of the basics.

 

What is it?

The Canada Pension Plan is a contributory, earnings-related social insurance program.  It is funded entirely by plan members’ contributions and the investment earnings on those contributions.  The CPP provides limited protection to a contributor and his or her family against the loss of income due to retirement, disability and death. 

 

Who pays for it?

Every person in Canada over the age of 18 who earns a salary must pay into the Canada Pension Plan.   Contributions are 9.90% of earnings between $3,500 and the yearly maximum pensionable earnings (YMPE) which for 2010 is $47,200.  You and your employer each pay half of the contributions (4.95%).  If you are self-employed, you pay both portions.  You stop contributing once you start receiving a CPP disability or retirement pension or at age 70, whichever comes first. 

 

How much are the benefits?

The amount of retirement benefit you receive is dependent on how much you contributed and for how long.  Because the calculation is based on your average annual contributions, lower income years can reduce your ultimate benefits.  You are however able to drop certain periods from the calculation so that those lower income years won’t adversely affect your benefits.  If you stopped working for a period of time while raising your family you may be eligible for the Child Rearing Provision which drops the years in which you had children under the age of seven. 

 

The retirement benefit is designed to replace approximately 25% of your annual pensionable earnings.  The current maximum monthly retirement benefit is $934.17.  CPP benefits are taxable and may affect eligibility for income-tested benefits such as Guaranteed Income Supplement.

 

You can request a current statement showing your contributions and estimated benefits by calling 1-800-277-9914 or by clicking here. 

 

Is CPP sustainable?

Since 1998, when contribution rates were increased and the CPP moved from pay-as-you-go financing to fuller funding, a new investment policy was introduced to maintain its sustainability.  The CPP Investment Board uses qualified professionals to invest Canada Pension Plan funds in financial markets. The Board broadly follows the same investment rules as other pension plans.  The government contends that the CPP is now fully funded and sustainable.

 

This is just some of the very basic information on Canada Pension Plan.  If you would like more information you can visit the CPP section on the government website at http://www.hrsdc.gc.ca/eng/isp/cpp/cppinfo.shtml#a1.  As always, we’re here to help answer or get the answers to all your questions regarding your financial concerns.

 

 

 

 

Bits and Pieces

 

RRSP Deadline Looms – MARCH 1ST 

Don’t forget, the deadline for contributing to your RRSP and deducting it against your 2009 income is March 1st.  If you haven’t yet contributed, you can do so by cheque, through your online banking or through a RRSP loan.  For more information please visit the RRSP section on our website (click here) or call us at 604-737-8886.

 

Other Important Dates

  • RRSP contribution receipts for the last ten months of 2009 have been issued and mailed out.  For RRSP contributions made in the first 60 days of 2010, the receipts will be mailed out within two weeks of the contribution being received.
  • T4RIF and T4RSP tax slips will be mailed out by February 28th at the latest.
  • T5 tax slips for earnings on GICs and corporate class mutual funds will be mailed out by February 28th at the latest.
  • T3 tax slips for earnings distributed on mutual funds in non-registered accounts will be mailed out by March 31st at the latest.

If you lose or believe you are missing any receipt or tax slip, please contact our office and we’ll have a duplicate one issued for you.

 

In 2010 we are celebrating our 25th Anniversary of serving our clients.  For 25 years we have been providing financial advice and products to some of the finest people we know.  We really do appreciate you and we look forward to continuing to serve you for many years to come!

 

 

 

 

 

MFG Financial Dispatch is our monthly email newsletter designed to keep you up to date on timely financial issues that may affect you and to pass on timeless information and advice regarding financial issues.  Archived issues are available in the Client Centre on our website (macintoshfinancial.com).

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