OTTAWA (Reuters) - Finance Minister has given Canadian banks one week to comply with his request they provide seniors with more flexibility when withdrawing pension funds, so they can avoid losses due to the market meltdown.
In a letter to federally-regulated banks and other institutions published late Thursday, Flaherty asked them to ensure their clients can make the required minimum withdrawals from their registered retirement income funds (RRIFs) without having to sell assets and therefore take a big loss.
This could be done through an option known as "in-kind" transfers whereby stocks or other assets are removed from the RRIF and transferred to another account just like a cash withdrawal. But the transaction does not involve the sale of assets.
Flaherty said it had been brought to his attention that some banks were not informing clients of this option where it exists and that in other cases, institutions were not set up to carryout the in-kind transfers.
"To address this issue, I am expecting all financial institutions to accommodate in-kind transfers - at no cost to clients - or offer another solution that achieves the same result," Flaherty wrote.
"I would like to hear from you by Friday, November 28 to confirm steps have been taken to ensure that in-kind asset transfers between RRIFs and other accounts are possible at no cost to the client and that RRIF clients will be made aware of this option."
In the Canadian system, at the age of 71, retirees must convert retirement savings accumulated during their working life into usable income by transferring them to a RRIF and are not taxed for doing so. They must then withdraw as a minimum a specified percentage of the RRIF every year.
Opposition parties in Canada have citied Prime Minister Stephen Harper for not moving more quickly during the financial crisis to help retired people.
CARP, a group that lobbies for seniors, has called for a moratorium on mandated minimum RRIF withdrawals, among other measures to protect their savings.
(Reporting by Louise Egan)
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