Labour Sponsored Investment Fund Evaluation

Great Returns Under Most Scenarios!

LSIF Investm't Assumed Growth Rate Investm't Vehicle Tax Refund Rate Total Cash Invested Holding Period (Years) Investm't at End of Period Fund Redempt'n Fee Fund Proceeds Tax on Gain Net Proceeds RSP Redempt'n Tax Rate Final Value Avg. Annual Return
$5,000 5.00% RSP 78% $1,100 8 7,387 0.00% 7,387 0% 7,387 48% $3,841 16.9%
$5,000 5.00% RSP 66% $1,700 8 7,387 0.00% 7,387 0% 7,387 36% $4,728 13.6%
$5,000 0.00% RSP 78% $1,100 8 5,000 0.00% 5,000 0% 5,000 48% $2,600 11.4%
$5,000 -5.00% RSP 78% $1,100 8 3,317 0.00% 3,317 0% 3,317 48% $1,725 5.8%
$5,000 5.00% Non RSP 30% $3,500 8 7,387 0.00% 7,387 24% 6,814 0% $6,814 8.7%
$5,000 5.00% Non RSP 30% $3,500 8 7,387 0.00% 7,387 18% 6,958 0% $6,958 9.0%
$5,000 0.00% Non RSP 30% $3,500 8 5,000 0.00% 5,000 0% 5,000 0% $5,000 4.6%
$5,000 -5.00% Non RSP 30% $3,500 8 3,317 0.00% 3,317 0% 3,317 0% $3,317 -0.7%

Prepared by Carl Spiess, Director, Wealth Management, ScotiaMcLeod

Assumptions

  • Marginal Tax Rates used: 48% or 36% as indicated.
  • Capital Gains taxed at 50% of the marginal rate (in the last example losses could be used to offset future gains).
  • Fund is kept for the full 8 year holding period to avoid 30% tax credit clawback. Retirees now also need to hold the fund for 8 years to avoid tax.
  • Since fund is held for the full 8 year period, there is no redemption fee. Redemption fees are paid only on early withdrawal of fund.
  • Upon early withdrawal of investment and subsequent repayment of tax credits, investment will still have benefited from the deferral of tax.
  • Average Annual return calculated on growth of total cash invested over the holding period.
  • You live in a province where the tax breaks are available.

Bottom Line

  • Even assuming low returns, for people in high tax brackets (earning over $29,000 a year) LSIFs can provide good after tax total returns.

Inside and Outside the RSP - LSIFs Provide a 30% Tax Break (up to 35% for some Ontario funds)

Maximum tax credit used in this illustration on a $5,000 investment is $1500. This $1500 includes 15% Federal ($750) and 15% Provincial ($750) Tax credits. (Can be up to 20% in Ontario for a 35% total)

Please note that these are projections only. Please consult the fund prospectus for complete details on risk factors, tax refund rates and other pertinent information. Unit values and investment returns will fluctuate.

For more information on how labour funds might fit with your investment goals, contact Andrew McGoey at 416.945.4107.

 



Contact Us

T.  416.863.RRSP (7777)
     1.800.387.9273
F.  416.863.7479
E. carl.spiess@scotiawealth.com
    allan.mcglade@scotiawealth.com

ScotiaMcLeod is a division of Scotia Capital Inc., member of CIPF.

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