Mutual fund leaders applauded Revenue Canada's decision to drop plans to tax the administrative fees paid from within RRSPs and RRIFs. Revenue Canada issued a clarification of its policy October 2. 

  "When administration fees are paid from within the RRSP with RRSP funds, there are no tax consequences whatsoever. There are no benefits; there's nothing deductible. IT just is. Now, when the fees are paid outside the RRSP by the annuitant, there's no deduction allowed," said Revenue Canada spokesperson Collette Gentes-Hawn. 

  Under the original ruling, fee payments from within the plan would constitute a taxable benefit and fee payments from outside the plan would be treated as a new contribution. 

  Paying fees from outside the plan brings the inconvenience of having to write a cheque or have funds deducted from some other account. But paying the fee from funds inside the plan means there's less money available at retirement. 

Less Money At Retirement
  At $125 per year for a typical RRSP fee, a 30-year-old potentially would have $23,300 less in their retirement plan at age 65(assuming 8 per cent annual returns). A similar 40-year-old would lose $10,000 from their plan. 

  IFIC president Tom Hockin said the old rule was unfair for mutual fund investors, because people who save money in bank accounts wouldn't have faced the same tax. Also it would have been difficult for fund companies to comply. 

  "We avoid all the paperwork, the forms especially. One firm alone said it would be a quarter of a million dollars just for the paper and administration of this, mush less the sending of the bills for a $10 or $20 fee, a new box on the tax form. So all of that has been obviated," Hockin said.