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Newsletter. Issue 2004-03. February. 07, 2004
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Health & Wellness

International pension readiness report finds most major industrial countries unprepared for coming crisis
Standards of Living in Mature Economies Jeopardized by Impact of Aging
DAVOS, Switzerland, Jan. 26 /CNW/ - The combined effects of slower  labour-force growth and population aging could undermine the pension systems and broader economic prospects of many developed countries, according to a major new study by the World Economic Forum in partnership with Watson Wyatt Worldwide.
    The study, released at the World Economic Forum's Annual Meeting in Davos last week, raises profound questions around labour participation and productivity, the cross-border flow of capital, the globalization of labour markets, the financial viability of social insurance programs, and how economic output is shared between working-age and retiree populations.
The report highlights demographic trends sweeping the globe and their economic consequences. For example:

  • The EU will experience a significant decline in its working-age population. Taken together, even the less-developed countries being considered for EU addition face shrinking labour forces. 
  • Germany and Mexico today have working-age populations of about  50 million. By 2030, Mexico will have twice as many working-age people as Germany. 
  • Italy's retirees will outnumber its active workers by 2030. 
  • Over the long-term, Japan would have to increase immigration 11 times over existing rates to make-up for its low fertility rates.
  • Assuming current demographic and economic trends hold, the EU's share  of total global output will shrink from 18% today to 10% in 2050.  Japan's share would decline from 8% to 4%.  
  • The 335 million workers that India is expected to add in the next 30 years approaches the total working-age populations of the entire EU and the United States combined in 2000. 
  • Other developing Asian countries, including China, as well as Central and South America, Africa, and the Middle Eastern countries will all have surplus labour over the coming decades.

    "Economic output is determined by labour force growth and productivity rates," said Richard Samans of the World Economic Forum. "In countries with significant projected labour shortages, the supply of goods and services may not meet demand and standards of living. However, things do not necessarily have to unfold this way."
    Among the remedies governments and business have at their disposal are increased immigration, capital deepening, technology investment and enticing additional workers into the labour force. They also need to develop ways to tap surplus labour pools in developing countries through greater economic integration than ever before.
    "While no single solution provides a magic bullet, it's clear that the flow of capital and labour across borders can be improved," said John Haley, president and CEO of Watson Wyatt. "If the world's developed countries cannot find adequate labour within their own borders, they can export capital to other parts of the world where there are ample and growing supplies of workers. It will help raise standards of living in the developing world. It
will provide sources of income and goods in the developed economies where worker shortages will strain the economic capacity to meet consumer needs. In the end, we all will benefit."
    Increased immigration can also help, but some societies are reluctant to allow significant immigration because of the domestic implications. Adding to the workforce can also be done to a limited extent through extending the working period for older workers and encouraging more women and younger workers into the workplace.
    Another consequence of growing retiree populations in the developed world is that the costs of retirement systems will significantly increase. This makes questions on whether pension systems should be "funded" or financed on a "pay-as-you-go" basis and how changes in living standards are allocated across segments of society supremely important - especially in light of the slowing labour force growth.
    "The demographic changes present enormous challenges for developed countries," said Sylvester Schieber, director of research at Watson Wyatt and co-author of the report. "There will be hard choices ahead, but in the final analysis, more global integration is needed, not less."
    "We all face a daunting task," said Samans. "If the impending labour shortages are not properly addressed, business and society will have to answer many difficult questions to avoid pitting the needs of the working-age and retiree populations against each other. The good news for now, however, is that there are a number of ways out, but finding them will require us to recognize that this is more than an issue of social security plan benefits and taxes. Fundamentally, it is a question of finding ways to improve economic growth and integration."
    The World Economic Forum featured a discussion on the report's implications at its meeting in Davos, Switzerland, on January 21-25, 2004.
Among those attending a special session were ministers from many OECD countries, CEOs, labour leaders and other experts. The Annual Meeting's theme this year was 'Partnering for Security and Prosperity'.
    Over the past two years, the Forum's Pension Readiness Initiative has combined leaders from financial services and employment industry member companies with other experts from labour unions, international organizations, senior citizen groups and government for the purpose of compiling a comparative assessment of the retirement system readiness of OECD countries.
    A copy of the report's executive summary is available at www.weforum.org and www.watsonwyatt.com
About World Economic Forum
    The World Economic Forum is the foremost global community of business, political, intellectual and other leaders of society committed to improving the state of the world. Incorporated as a foundation, and based in Geneva, Switzerland, the World Economic Forum is impartial and not-for-profit; it is tied to no political, partisan or national interests. The Forum has NGO consultative status with the Economic and Social Council of the United Nations. ( http://www.weforum.org )

Media Advisory - Tax Tips to Keep in Mind when Investing
TORONTO, Feb. 2 /CNW/ -
- Set up a separate bank account under your child's name to deposit your Child Tax Benefit cheques. As long as the child's income is less than the basic personal amount, the money will earn interest tax-free.
- A lower-income spouse should use their funds to make investments since the income earned will be taxed at a lower rate.
- Interest on loans used to buy non-registered investments, such as stocks and bonds, is tax deductible. However, interest on RRSP loans is not. You can maximize your tax advantage by using cash to buy RRSPs and borrowing to buy non-registered plans.
- Interest receives less preferential tax treatment than dividends or capital gains. Keep interest-earning investments in RRSPs so they will not be taxed and keep investments generating dividends or capital gains in non-registered plans.
- When holding mutual funds outside of your RRSP, keep a record of any distributions that are reinvested to buy more units. These are added to the Adjusted Cost Base of the units and reduce the capital gain when they are redeemed.
- If non-registered investments are transferred to an RRSP, they are considered sold for Fair Market Value. While any resulting capital gain is taxable, a special rule deems a resulting capital loss to be nil. This rule can be avoided by simply selling investments and having the RRSP reacquire them.
- When capital losses exceed capital gains, apply the resulting net capital loss to capital gains incurred in any of the three prior years or in any future year. Assuming income levels remain the same, it will generally be more advantageous to carry them back since tax rates were marginally higher in those years. It will be especially advantageous to carry them back to 2000 if your inclusion rate for that year was higher than 50 per cent

Grapefruit Diet: Fact, Not Fiction
Scripps Clinic Research Verifies Link between Grapefruit and Weight Loss
    SAN DIEGO, CA, Jan. 22 /CNW/ - The grapefruit diet is not a myth. That's what a new study by the Nutrition and Metabolic Research Center at Scripps Clinic confirmed. Researchers there found that the simple act of adding grapefruit and grapefruit juice to one's diet can result in weight loss.
    The 12-week pilot study, led by Dr. Ken Fujioka, monitored weight and metabolic factors, such as insulin secretion, of the 100 men and women who participated in the Scripps Clinic "Grapefruit Diet" study. On average, participants who ate half a grapefruit with each meal lost 3.6 pounds, while those who drank a serving of grapefruit juice three times a day lost 3.3 pounds. However, many patients in the study lost more than 10 pounds.

    "For years people have talked about the grapefruit diet, and some even swear by it, but now, we have data that grapefruit helps weight loss," said Dr. Fujioka, principal researcher at the Nutrition and Metabolic Research Center at Scripps Clinic. "Our study participants maintained their daily eating habits and slightly enhanced their exercise routine; the only dietary change was the intake of Florida grapefruit and grapefruit juice."

    Additionally, the research indicates a physiological link between grapefruit and insulin, as it relates to weight management. The researchers speculate that the chemical properties of grapefruit reduce insulin levels and encourage weight loss.

    The importance of this link lies with the hormone's weight management function. While not its primary function, insulin assists with the regulation of fat metabolism. Therefore, the smaller the insulin spike after a meal, the more efficiently the body processes food for use as energy and the less it's stored as fat in the body. Grapefruit may possess unique chemical properties that reduce insulin levels which promotes weight loss.

    Obesity continues to plague the American public and the health system. According to the National Center for Health Statistics, 64 percent of U.S. adults are considered overweight or obese. Overweight or obese people stand a greater likelihood of developing life-altering and/or life-threatening illnesses such as heart disease, cancer, diabetes, high blood pressure, high cholesterol, sleep apnea, arthritis, liver problems, and many others.

    "Our study shows grapefruit can play a vital role in overall health and wellness, and in battling America's ever-growing obesity epidemic," stated Dr. Fujioka. "Whether it's the properties of grapefruit or its ability to satiate appetites, grapefruit appeared to help with weight loss and decreased insulin levels leading to better health. It's good the "Grapefruit Diet" never lost its popularity among the public."

    The study linking grapefruit and grapefruit juice consumption to weight loss continues to broaden the health benefits associated with this citrus product.

    Based in Lakeland, Fla., FDOC is a state agency devoted to promoting Florida citrus products. Florida is one of the world's leading producers of oranges, grapefruits and specialty citrus fruits, with more than 90 percent of Florida oranges being made into orange juice. The economic impact of the citrus industry on Florida's economy is $ 9 billion, and the industry employs about 90,000 Floridians.

    Founded in 1924, Scripps Clinic is a multi-specialty, outpatient care facility caring for patients at multiple locations throughout San Diego County, California including Torrey Pines, Del Mar, Encinitas, La Jolla, Rancho Bernardo, Rancho San Diego, San Diego, and Santee. Scripps Clinic and its physicians are world-renown for research-driven care and medical specialty expertise and is an operating unit of Scripps Health, a not-for-profit, community-based health care delivery network that includes more than 2,600 affiliated physicians, five acute-care hospitals, home health care and associated support services. Scripps Health is one of the largest health care organizations in San Diego County, drawing from the expertise of more than 10,000 health care professionals.

Retirees should keep working - on their RRSPs, according to RBC poll
TORONTO, Jan. 28 /CNW/ - Canadian retirees may be missing the opportunity to take full advantage of the benefits of investing in an RRSP, based on results of the 13th annual RBC/Ipsos-Reid RRSP poll, which shows that almost 80 per cent of retirees under 69 years of age are not contributing to their RRSPs. This is substantiated by a Statistics Canada report in October 2003, which showed that nearly 80 per cent of Canadians who filed a 2002 tax return had unused RRSP contribution room.
"Many retirees under 69 years old may think because they are no longer working they are ineligible to contribute to their RRSP," said Michael Walker, director & vice president, Financial Advisory Solutions Team at RBC Investments. "If they have unused contribution room available, investing right up to age 69 can be a great strategy to defer taxes, lower taxable income and shelter growth inside an RRSP."
According to the RBC/Ipsos-Reid poll, the average yearly household income for retirees is close to $53,000 with 44 per cent of retirees reporting that employer pension plan is their primary source of income in retirement.
Using this example, a 59 year-old retiree earning $53,000 annually, with $50,000 of unused RRSP contribution room, could benefit from continued contributions to his or her RRSP, according to Mr. Walker. Assuming a rate of return of six per cent, this individual could contribute $5,000 a year for 10 years to their RRSP, by age 69 this investment would have increased the RRSP by nearly $70,000. In addition, the individual would have benefited by receiving a tax refund each year of approximately $1,700, which could be put towards future RRSP contributions.
The most popular reason given by retirees for not contributing to their RRSP is that they are 'already retired/too old to contribute' (55%), with 'I don't have enough money to contribute' (18%) a distant second.
"Just because you are retired does not necessarily mean you should stop contributing to your RRSP," said Mr. Walker. "A financial advisor can develop a strategy to address cash flow and tax concerns, while ensuring that you make the most of your RRSP."
These are the findings of an RBC/Ipsos-Reid poll conducted between October 6 and October 24, 2003. The telephone survey is based on a randomly selected sample of 1,205 adult Canadians, of which 137 are retirees under 69 years of age. With a sample of this size, the results are considered accurate to within (+/-) 2.8 percentage points, 19 times out of 20, of what they would have been had the entire adult Canadian population been polled. The margin of
error for retirees under 69 years of age is (+/-) 8.4 percentage points. These data were statistically weighted to ensure the sample's regional and age/sex composition reflects that of the actual Canadian population according to the 2001 Census data.
About RBC Financial Group
Royal Bank of Canada (TSX, NYSE: RY) uses the initials RBC as a prefix for its businesses and operating subsidiaries, which operate under the master brand name of RBC Financial Group. Royal Bank of Canada is Canada's largest financial institution as measured by market capitalization and assets, and is one of North America's leading diversified financial services companies. It provides personal and commercial banking, wealth management services, insurance, corporate and investment banking, and transaction processing services on a global basis. The company employs 60,000 people who serve more than 12 million personal, business and public sector clients through offices in North America and some 30 countries around the world. For more information, please visit www.rbc.com.

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