The British Columbia government has announced new standards for workplace pension plans, creating options that can be activated even before employees retire and allow them to swerve emergency borrowing.
Those funds can now be accessed for specific reasons of financial hardship, including the inability to pay medical expenses and threat of eviction or mortgage default.
“Obviously there is some risk with tapping into retirement accounts but is there really? The Canadian real estate market has been a pretty incredibly stable market; for most generations, home ownership has been the best retirement move they have made,” Dustan Woodhouse
, a mortgage broker with Dominion Lending Centres
Canadian Mortgage Experts, told MortgageBrokerNews.ca. “If you’re sitting on money locked in an investment account that you could unlock stay in the real estate market that’s a good thing.”
Keeping older British Columbians in their homes is, in fact, a major driver of the provincial move.
Under the plan, British Columbians will be the ability to tap into RRSP funds in the event of a major life event, which could save them from foreclosure on their homes. This will allow them to use their own funds instead of having to borrow, which, in the past was sometimes done with costly interest rates. Often winning clients refinances in those situations is all but impossible, complain brokers, especially given the growth of collateral charge mortgages
The province says modernized standards will improve security and options for more than 900,000 residents covered by employer-sponsored pension plans.
The changes govern all employment pension plans registered in B.C., as well as those registered elsewhere that have members employed in the province.
They include greater access to locked-in retirement accounts such as locked-in RRSPs or life income funds.
Revisions also harmonize pension standards between Alberta and B.C., reducing the complexity and cost of administering pensions that have members in both provinces.
“I don’t think it’s going to have a significant impact on the market, but do I think it is good for those who are directly impacted by it?” Woodhouse said. “Absolutely … the sooner you buy the better off you are.”
With files from the Canadian press