How to pay for retraining

Age often works against people looking for a job. What’s more, the current reliance on new technology in many industries puts older unemployed Canadians at an even greater disadvantage.

The federal government may soon offer some help. But any advantages of a just-announced scheme over plans that already exist remain to be seen.

A new Registered Individual Learning Account (RILA) is part of a package of learning-related measures announced in the Speech from the Throne that opened Parliament at the end of January.

The RILA is designed to assist adult Canadians upgrade to ‘higher-level skills’. These skills are necessary if we are to compete in the “fast-paced, technology-driven world economy,” said Governor General Adrienne Clarkson in her address.

Paul Hickey is a tax partner with KPMG, based in Toronto. “I’m not that excited about it because there are already a couple of other vehicles for this,” he says.

Existing plans

  • For adults, the primary tax-assisted means of paying for later-life education is the Lifelong Learning Plan (LLP). Since 1999, this plan has allowed Canadians to use the money in their SPs to finance education for themselves or their spouses.

You can withdraw for up to four years, to a maximum of $10,000 in a calendar year and a limit of $20,000 in total.

Withdrawn amounts are not included in your income for tax purposes and the money must be repaid in no more than 10 years.

  • Registered Education Savings Plans (RESPs) offer incentives to save for a child’s education. Current regulations say that the beneficiary of the RESP can’t be older than 21 at the time of a contribution.

Unlike an RRSP contribution, a contribution to an RESP does not garner a tax deduction. Any growth in the plan is, however, sheltered from tax.

Another advantage is that the Canada Education Savings Grant (CESG) sees the first $2,000 contribution to an RESP in a year matched by a government grant of $400, or 20 per cent, to a limit of $7,200 over the plan’s lifetime.

The Throne Speech serves a largely ceremonial role in outlining the government’s broad intentions. It offered scant details of the new RILA. The goal of the plan, according to the Speech, is “to help adults who want to improve their skills, but who may face difficulty finding the time or resources to do this while providing for themselves and their families.”

Says KPMG’s Hickey, “If this new account enhances the Lifelong Learning Plan, then great. But if it’s simply going to be window dressing on the existing plan, then it’s all smoke and mirrors.”

With files from Marilyn Smith.