Finance Minister Jim Flaherty said Thursday he considers it imperative that the government restrain the growth of public pensions, although he stopped short of calling them unsustainable.

Flaherty made clear that changes are coming to the Old Age Security program that pays an average $500 a month to lower-income Canadians upon turning 65, and that he will outline the government’s thinking in the upcoming budget.

“This is not an issue that can be ignored unless we want to put at risk the fiscal track of the country, which would be a mistake,” he told reporters Thursday on a conference call from Tel Aviv, where he has been visiting for most of the week.

“The research we have, both within and outside government, has shown us for some time that the demographic challenge will bring substantial pressure on the long-term sustainability of these programs.”

The opposition parties and some experts have been critical of the government for presenting the issue as a clear-cut case of unsustainability.

Ottawa estimates the cost of OAS will rise from $36 billion in 2010 to $108 billion in 2030, while the number of taxpayers for every senior declines from four-to-one to two-to-one.

But as a slice of gross domestic product, or the size of the economy, OAS remains tiny fraction. It will only increase from the current 1.8 per cent to 2.5 per cent in 20 years. Adding in the Guaranteed Income Supplement that goes to the poorest of Canadians brings the total cost to 3.2 per cent of GDP in 2030.

An analysis commissioned by the government also concluded that Canada does not face a major affordability problem with public pension schemes, adding that there is “no pressing financial or fiscal need” to raise the age of eligibility.

New Democrats said they would ask the Commons to reject cutbacks to OAS.

“Advice commissioned by the Harper government contradicts these very claims. It’s time for the government to back down from this wrong-headed move,” said seniors critic Irene Mathyssen in a release to the media.

Flaherty agreed that the changes are for the long term and do not impact on the government’s current deficit, which is slated to decline rapidly each of the next three years to a balanced position.

He reiterates that any measures in this year’s budget, which is expected in March, will not impact anyone currently receiving OAS or about to start receiving the benefits.

It remains unclear whether the government plans to announce a review of the programs or announce specific changes to OAS in the upcoming budget.

Flaherty said he would not reveal what is in the budget, but has previously called the budgetary item on pensions a “review.”

In another key measure of the budget – cutbacks to spending – Flaherty said the special committee of the Treasury had concluded its work on the three-year austerity program announced last year and that Finance officials are studying the recommendation.

In the 2011 budget, Flaherty said the government was looking to cut at least $4 billion from departmental discretionary spending in the next three years, but Treasury Board President Tony Clement has suggested cuts could total $8 billion.

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Maple Group, the consortium of 13 financial institutions looking to take control of the owner of the Toronto Stock Exchange, is extending its takeover offer by about a month.

The friendly takeover offer will be open until Feb. 29. It had been set to expire Jan. 31.

The group says it will continue to extend the deadline until it receives a verdict from provincial and federal regulators, which are reviewing how the deal to amalgamate trading and clearing platforms would affect Canada’s capital markets.

“We always said we would table an offer to investors once we’ve met certain conditions, chief among them being regulatory approval,” said spokesman Peter Block.

“So we’re not making investors bet that we will get regulatory approval or we won’t.”

Maple has made numerous submissions to regulators in Ontario, Quebec, Alberta and British Columbia, as well as the federal Competition Bureau in an effort to get approvals for a deal that values the TMX Group (TSX:X) at $3.8 billion.

As part of its bid, Maple plans to buy all of Alpha Trading, an alternative trading system owned by the major players in the Canadian securities industry including the big banks, and CDS Inc., a clearing and depository firm, and add them to TMX Group.

Some smaller investment firms have complained the big brokerages owned by Maple members could receive preferential treatment if the deal goes through and regulators are looking at whether to approve an enlarged TMX.

The Maple group has also tabled two new proposals that it believes will help alleviate some of the concerns, including the CDS pricing model and proposed remedies to address concerns regarding equities trading, Block said Tuesday.

“(The proposals were tabled) with the idea that these two key pieces will address the concerns expressed by the regulators and market participants,” Block said.

The terms of those proposals are not yet being made public.

CDS Inc. is a little-known but central part of Canada’s stock and securities trading. Among other things, it manages the transactions required to complete purchases and sales of securities on Canada’s public markets.

It also manages a number of national databases on behalf of the provincial securities regulators, including the SEDAR repository for regulatory filings by publicly traded companies.

The investors in the Maple Group include the Canada Pension Plan Investment Board, the Ontario Teachers’ Pension Plan, several of the big banks and Manulife.

The Maple Group was formed after TMX Group announced early last year that it wanted to merge with the company that owns the London and Milan stock exchanges, creating a transatlantic organization with special strength in mining.

That deal fell apart, however, after the TMX failed to get sufficient support from its shareholders.

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The surge in Canadian borrowing in the last five years has been driven primarily by the country’s most indebted households.

New research from CIBC World Markets Inc. notes that while much concern has been raised about the record level of Canadian household debt, now at a debt-to-income ratio of 151 per cent, little analysis had been done to determine the distribution of the debt and what is driving its growth.

The CIBC research found that Canada’s debt-to-income ratio is topped by only seven other developed economies. Within Canada, the research found that households heavily reliant on borrowing, those with a greater than 1.6 debt-to-gross income ratio, now hold 73 per cent of all household debt in Canada.

“Our new analysis found that all of the rise in debt since 2007 has been driven by borrowing from those with a high debt-to-gross income ratio,” says Avery Shenfeld, Chief Economist at CIBC, who co-authored the report with Benjamin Tal, Deputy Chief Economist. “The growth in debt-to-income ratios has come from a piling on of debt by those with high debt burdens, rather than from less indebted households getting drawn to the punchbowl by the promise of low rates. Some 34 per cent of households that have debt are now in the high-debt-burden category and they account for nearly three-quarters of household debt outstanding.”

Shenfeld says that, not surprisingly, the share of those with high debt-to-income ratios is greater in the provinces of B.C., Alberta and Ontario where housing is the most expensive. What he found more surprising was the growth in Canadians over the age of 45 who hold a high-debt-burden. The share of heavy borrowers in this age group has climbed from 36 per cent in 2007 to 44 per cent in 2011.

“A rising share of the highly indebted are over 45 years old, an age where accumulating net assets ahead of retirement should be paramount. Canadians nearing retirement who should be in their prime savings years are, instead, getting themselves deeper into debt. We are already seeing an uptrend in bankruptcies for those 50 and over, but the more material impact will be that this group’s ability to spend could be severely squeezed upon retirement.”

He notes that the root of recent debt growth has been the combination of ultra-low interest rates and weak growth in household real incomes. “Borrowing is what fills the gap between what we want to buy and our incomes, particularly for lumpy expenditures like houses, vehicles and other durable goods. Strong growth in real incomes can therefore reduce the reliance on debt by the household sector.”

The report also examined the differences between the spending habits of heavy and non-heavy borrowers. Controlling for family composition and age, the research found that households with lower debt-to-income ratios appear to devote the lower costs they face on debt service to savings, rather than consumption.

The result is that high-debt-load Canadians are also being hurt relative to other families in terms of their accumulation of assets. While their debts have grown by 18 per cent since 2007, high debt-to-income Canadians have seen their assets accumulate by less than four per cent over the same period. This compares to a roughly 10 per cent growth in assets for those with more moderate debt-to-income burdens.

The full report can be read online. (PDF)

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Canadian small and medium enterprise (SMEs) owners and executives support the adoption of new Pooled Registered Pension Plans (PRPPs), according to a recent poll of more than 800 companies, conducted by Leger Marketing for the Canadian Life and Health Insurance Association (CLHIA).

The PRPPs, known in Quebec as Voluntary Retirement Savings Plans (RVERs), were introduced in the fall as a means to give small firms and their workers the opportunity to access a large privately administered pension plan.

Sixty-eight percent of SME employers who do not currently offer a retirement plan of any kind are interested in providing PRPPs, the poll found. Statistics Canada data shows that more than half of all private sector workers do not currently have access to  workplace retirement plan.

“Small and medium sized business executives are ready to embrace PRPPs as they look for new ways to keep employees and attract new people,” said Frank Swedlove, President, Canadian Life and Health Insurance Association in a statement. “We are on the cusp of making a fundamental shift in the pension landscape.”

The poll also showed that a large majority – 71 per cent in across Canada except in Quebec where it was 74 percent – of all SMEs agree that employers should be required to offer some form of retirement plan to employees, especially given that PRPPs will be a low-cost alternative. Support for making it a requirement was strong in every region in Canada. It was highest among those who already have a plan (79 per cent), and still very strong (66 per cent) among those who do not have a plan.

Even though it is not mandatory for employers to contribute to the PRPPs in the current legislation, 73 per cent of SME executives interested in providing PRPPs to their employees said they will “look at ways their business could contribute to the plan over and above what the employee puts into it”.

Two-thirds of survey participants believe that their employees will be interested in participating in PRPPs.

You might also be interested in PRPPs Explained

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Is Canada in a recession? A majority of Canadians think so. The data and economists say otherwise.

The issue arose when pollster Michael Marzolini of Pollara reported to the Economic Club recently that an astounding 70 per cent of Canadians felt the R-word applied to today’s economy, and a similar number thought the downturn would last at least another year.

The finding was immediately scoffed at by economists and policy-makers who pointed out that the recession officially ended two and a half years ago, in the summer of 2009. Since then, except for a brief skid in the second quarter of 2011, the economy has been growing steadily.

Numbers don’t lie, they say. Hardly a day goes by when Prime Minister Stephen Harper and Finance Minister Jim Flaherty – among other government ministers – don’t trumpet the fact that Canada has created more than 600,000 new jobs since the slump, much more than the 400,000 or so that were lost.

So why do Canadians feel so poorly?

The main reason is that Canadians likely perceive what is a recession differently than economists, and if numbers don’t lie, they can be selective.

The technical definition of recession is when real, inflation-adjusted gross domestic product – the broad measure of economic output – falls in back-to-back quarters. That happened in the fourth quarter of 2008 and the first two quarters of 2009 – a nine month retreat.

But real GDP doesn’t tell the whole story, or even the most important story about an economy’s health.

Real GDP adjusts for inflation, but not for population. That means a country’s economy can be growing simply because the population is rising, and Canada’s population increases about one per cent a year. Similarly, residents of a country such as Japan with a declining population, become richer even when their economy is not growing.

Canada’s economic performance looks different when population growth is factored out.

By that measure, Canada’s per-capita GDP is still 1.4 per cent below what it was prior to the recession, more than three years ago.

“To most people, real GDP doesn’t really matter, what matters is per capita income,” said Craig Alexander, chief economist with the TD Bank.

Canadians are not doing so well on the issue of net worth, either. While slightly higher, household net worth is below 2008 levels once inflation is taken into account, and income growth has also fallen below the rate of inflation this past year. That means Canadians are poorer and their disposable income is now declining.

“Canadians are looking at things like grocery costs, fuel costs, housing costs, user fees, less net incomes,” Pollara chief operating officer Robert Hutton said of his firm’s polling results.

“People are just reporting overwhelmingly, ‘You know I’m not getting ahead, at best I’m staying even.’”

Perhaps the most trumpeted statistic purportedly showing how well Canada has rebounded is jobs.

The Pollara poll shows Canadians aren’t buying it, however. Every week they read about factories shutting down, layoffs, or companies demanding workers accept wage cuts. Last week Toronto’s Pearson airport sent out pink slips to 299 workers, on the heels of other layoffs in the city and streamlining of drug research operations in Montreal.

Anecdotal events may impact the perception of bad times, but the macro numbers – if the right ones are cited – also point to weak labour conditions.

The simple calculation is that employment in Canada is about 182,000 above pre-slump levels. That looks great when measured against the U.S., which is still six million shy. And it looks good compared to 2008, as well.

But the fly in the ointment again is population. More Canadians came of working age in the past three years, and immigrants kept arriving – they too are looking for work. To return to pre-slump levels of employment, the economy would have needed to generate an additional 750,000 jobs beyond the pre-slump peak, not merely 182,000.

Canadian Auto Workers economist Jim Stanford, who has studied the jobs record extensively, says the telling statistic is the employment rate, which calculates people working in relation to those of working age, or over 15.

The employment rate peaked in February 2008 at 63.8 per cent, dipped to 61.3 per cent in July 2009 at the tail end of the recession, then climbed to 61.8 in the next year. It has since edged down to 61.7, and is still more than two percentage points below the pre-slump high.

“That means we’ve fixed one-fifth of the damage, and fourth-fifths of the damage is still with us. That’s why it still is recessionary conditions,” said Stanford.

Adding to the perception of gloom, said Alexander, is that in many cases people who lost jobs in the recession were not the people who found jobs in the recovery. Most lost jobs were in high-paying manufacturing industries, and most of those created have come in lower-paying service industries.

That does not mean Canadians are right that the country is in recession, however. Even Stanford will acknowledge that.

The confusion stems from the official definition of recession and what Canadians think it is. For most people, recession is a description of a bad economy; for statisticians, it’s simply the direction the economy is moving.

Philip Cross, chief economic analyst for Statistics Canada and the person who declares the country in or out of recession, admits he gets grief every time he pronounces the country out of a slump.

“Invariably when we say the recession is over, I get a great deal of abuse because people say the level of economic activity is still rotten,” he explained.

“When we say the recession is over, what we’re saying is the period of things getting worse by the day is over. The level of economic activity could still be unacceptable, but at least you are going in the right direction, rather than the wrong direction.”

Canadians may be confused about the definition of recession, agrees Stanford, but they are correct in thinking they are still worse off than they were three years ago.

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Canada’s small business owners still don’t think the taxman treats them right even when they are asking for help in paying their taxes, a survey suggests.

Instead, words like “intimidating,” “pre-judged”, “guilty” and “witch-hunt” characterize many of the contacts businesses said they have had have with officials of the Canada Revenue Agency.

The survey of more than 10,000 small firm owners was the fourth in a series in the past 10 years by the Canadian Federation of Independent Business _ and it suggest that despite efforts by the tax agency to improve relations, little appears to have changed.

Only 14 per cent of respondents gave the CRA a good or excellent rating, while almost 40 per cent judged it poor or fail. Forty-four per cent gave the agency a C, or satisfactory grade.

Twice as many firm owners thought service had deteriorated over the past three years than those who thought it had improved – 17 per cent versus eight per cent. The majority said they found it had stayed the same.

“It’s not surprising, but it’s something that is important to validate,” said CFIB’s national affairs vice-president Corinne Pohlmann, the business group’s vice-president of national affairs.

“People are intimidated and also a lot of them are made to feel like they did something wrong every time they contact (the CRA). We need to make a shift in how they treat the taxpayer who most of the time just wants to do the right thing.”

Pohlmann acknowledged that feelings of unease are likely unavoidable when dealing with the taxman during an audit.

But she pointed out that the vast number of contacts between business owners and the tax agency have nothing to do with audits. In most cases, owners are seeking information or an interpretation of the tax code.

The problem, she said, is that they are put on the defensive and the CRA has no accountability for misinformation it might give out.

“You call CRA, you get an answer to your question, you apply what you understood the answer to be, you get audited and you get penalized because it was incorrect,” she explained.

“The repercussions for doing it incorrectly can be quite severe.”

In the survey, which was conducted about a year ago, only 20 per cent of respondents said the federal agency owned up to its mistakes.

A call to the RCA was immediately returned.

The CRA was given credit for introducing a Taxpayers Bill of Rights, a Taxpayer Ombudsman and requiring agents identify themselves, so that business owners can at least identify who gave them the information.

As well, business owners say there has been an improvement in the electronic services offered by the tax agency.

But the survey shows that small business owners believe those improvements were undone whenever taxpayers contact CRA agents directly.

The business group recommended that the tax agency better train its staff in dealing with the public to improve their communications skills.

Pohlmann said another initiative soon expected to go into effect may also help. Finance Minister Jim Flaherty announced in the 2011 budget the CRA will start providing written responses electronically, and will not hold businesses responsible if they are given erroneous advice.

“We’re quite excited by that because it means (owners) won’t be penalized if they get wrong information,” she said.

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The British Columbia government is letting residents try their hand at balancing the provincial budget – or simulate it, anyway.

Finance Minister Falcon has launched My B.C. Budget, a new website that uses forecasts from Budget 2011 and the September quarterly report to let people see the effect of raising and lowering revenues and spending on the provincial budget, with the goal of eliminating the 2013-14 deficit, which was forecast in September to be $458 million.

Once people have achieved a balanced budget, they can send their solutions to the finance minister with their comments. The government has a legislated commitment to balance the 2013-14 budget.

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A conservative U.S. think-tank said Thursday that global economic freedom declined last year because of “reckless” spending by governments that has failed to stop the global financial crisis.

The average score in the annual Index of Economic Freedom ranking 184 economies by the Heritage Foundation and the Wall Street Journal fell to the second lowest level in a decade.

Canada slipped almost a full point to sixth place. The Heritage Foundation said Canada fell out of the group of “free” economies and into the “mostly free” category.

Hong Kong was again named the world’s freest economy while Singapore took second place, positions they have held since the index began 18 years ago. Two other Asia-Pacific economies – Australia and New Zealand – were third and fourth, while Switzerland was fifth. The United States slipped a notch to 10th place. North Korea took the last place.

Countries are ranked based on 10 measures covering rule of law, how open their markets are, regulatory efficiency and size of government.

The report said government spending in response to the global economic crisis actually seems to be prolonging it in many countries and was the biggest factor in dragging down the global score.

“The mounting burden of reckless government spending in many cases has overwhelmed gains in economic freedom achieved in other policy areas,” the report said.

It said higher government spending has swollen public debt levels and resulted in increased bureaucracy which threatens to crowd out private sector business activity.

Read the full ranking online. 

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have a clear picture of their retirement and what they want to do. For all Canadians, just 16 percent have their future retirement plans laid out.

According to research from TD Canada Trust, one key reason for the uncertainty is the lack of financial planning. Only 38 percent of Canadians – and 43 percent of Boomers – report having a financial plan.

To encourage Canadians to start thinking about their financial future, TD has developed a retirement tracker – three simple questions to help Canadians determine if their retirement plan is on track at www.tdretire.com.

The retirement tracker encourages Canadians to answer three simple questions about their personal finances to get an idea of where they are in their retirement planning.  It weighs factors like the number of years until retirement, value of current savings and the amount of regular contributions and quickly determines whether Canadians are “Getting Started”, “On Their Way” or “On Track.”

“You need a plan to know how much money you need to save to make sure that it lasts throughout your retirement,” says Andrea Phillips, Vice President, Retail Savings and Investing, TD Canada Trust. “When you’re working hard to cover your day-to-day expenses, it’s understandable that your retirement seems a lifetime away and planning for it is not your top priority. But, don’t procrastinate; the more time you give yourself to save, the better off you’ll be.”

Surprisingly, Canadians who are furthest from retirement are the most likely group to contribute the maximum amount to their RSPs every year (21% of Canadians in their 30s versus 12% and 14% of Canadians in their 40s and 50s respectively).

To live the same lifestyle in retirement as you do during your working years, Phillips says Canadians should aim to save enough to have 60%-80% of their annual working income per year to live on in retirement. At this stage, it is good to take a look at where you stand today and to check that your investments are working for you.

“Many Canadians contribute regularly to their RSP but aren’t necessarily taking full advantage of the maximum contribution limits available to them,” says Phillips. “If you are in your prime working years, take the time to determine how much you will need in retirement and then consider increasing the amount that you are investing. For example, if you hold mutual funds, even a modest increase to your pre-authorized purchase plan contribution can make a big difference in growing the value of your RSP faster.”

Here’s how:

(The rate of return shown is used only to illustrate the effects of the compound growth rate and is not intended to reflect future values of mutual funds or returns on investment in the mutual funds. For illustrative purposes only. Based on retirement age of 65.)

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Saskatoon, Calgary, Edmonton and Regina will benefit from solid global demand for their local resources to post the strongest economic growth among Canadian cities in 2012. The Metropolitan Outlook-Winter 2012, released on Wednesday, is The Conference Board of Canada’s once-a-year simultaneous analysis of 27 Canadian census metropolitan areas (CMAs).

“In spite of global economic turmoil, high prices for agricultural products, minerals and oil are likely to continue. Canada’s prairie cities will reap the benefits of this global demand for commodities,” said Mario Lefebvre, Director, Centre for Municipal Studies.

“The outlook is not as promising for cities in central and eastern Canada. The uncertain global economy, a continued slow recovery in the manufacturing sector and the windup of fiscal stimulus introduced by governments in recent years will hamper overall economic growth.”

Saskatoon is forecast to lead the country in economic growth this year, but the four per cent increase in real gross domestic product (GDP) forecast in this edition of the Metropolitan Outlook is actually a slowdown from the estimated 4.6 per cent gain in 2011. The province’s booming primary sector is supporting gains in all industries, and employment is expected to grow by almost five per cent this year.

Top 10 cities and ties in terms of expected growth for 2012 are:

• Saskatoon, 4.0 per cent
• Calgary, 3.6 per cent
• Edmonton, 3.4 per cent
• Regina, 2.9 per cent
• Oshawa, Ont., 2.7 per cent
• Toronto, Trois-Rivieres, Vancouver, 2.6 per cent
• Kitchener-Cambridge-Waterloo, Windsor, 2.5 per cent

After two spectacular years, the St. John’s, Newfoundland economy is poised for the least amount of growth prospects this year. St. John’s led the CMA growth rankings in both 2010 and 2011, thanks in part to 25 per cent annual average growth in construction output over that period. Waning offshore oil production wells, fewer housing starts, and the end of the infrastructure spending program will weaken economic growth to just 0.7 per cent this year, lowest among the 27 CMAS covered in the Metropolitan Outlook.

Highlights for other Canadian cities include:

• Strength in manufacturing and the services sector will support GDP growth of 2.4 per cent in Halifax this year.
• A recovery in manufacturing will help lift Québec City’s GDP growth to 2.1 per cent in 2012.
• Montréal’s economy will expand by 2 per cent in 2012, partly thanks to stronger growth in manufacturing.
• Federal government belt-tightening will limit Ottawa–Gatineau’s economic growth to 1.8 per cent in 2012.
• Toronto’s GDP will grow by 2.6 per cent this year, as stronger consumer demand boosts manufacturing.
• With the global economy now back on shaky ground, Hamilton’s economy will grow by a modest 2 per cent in 2012.
• Winnipeg’s GDP will expand by 2.4 per cent in 2012 as manufacturing shows signs of new life.
• Regina’s robust economic growth will ease to 2.9 per cent in 2012, as construction growth slows.
• Saskatoon’s economic growth of 4 per cent this year is underpinned by Saskatchewan’s resource boom.
• Strength in Alberta’s energy sector and solid domestic demand will boost Calgary’s GDP by 3.6 per cent in 2012.
• Edmonton’s GDP will grow by 3.4 per cent in 2012 thanks to strength in the manufacturing and services sectors.
• Gains in manufacturing and services will support economic growth of 2.6 per cent in Vancouver in 2012.
• Fiscal restraint will limit Victoria’s overall economic growth to 1.9 per cent in 2012.

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The robust Canadian housing sector, especially the booming condo markets in Vancouver and Toronto, could be at risk in 2012, say the heads of some of Canada’s biggest banks.

Gordon Nixon, president and CEO at Royal Bank (TSX:RY), told a banking conference Tuesday that the Canadian housing market could be headed for a slowdown, led by Vancouver and Toronto.

“When you look at markets like Vancouver and Toronto there is a level of caution from a risk perspective that is higher today than it would have been a couple of years ago,” he said.

“When you look at the condo side there is probably vulnerability … it is the area which is most vulnerable with respect to Canadian housing.”

Bank of Montreal president CEO Bill Downe agreed there is a risk of a downturn in the housing market, saying the best hope is for a soft landing.

“There is no question that the warning signs around the Canadian housing market have been visible for more than a year,” he said, also mentioning Toronto and Vancouver specifically.

He said investor-owned properties are a cause for concern because there is a buildup of supply based on investor expectations that there will always be demand.

Downe said the hope – “and I think it’s a realistic hope” – is that the Canadian housing market will plateau and the system will absorb the excess supply built up in those two cities.

The comments of the CEOs came as data showed that housing starts rose more than expected in November to more than 200,200 units, with condos in Toronto and the Atlantic region leading the way.

The influx of multi-unit construction has led some economists to warn of overbuilding, which could leave a glut of unsold homes on the market in the case of a downturn.

A downturn in demand would also likely lead to an easing of Canadian home prices, which The Economist magazine recently declared are about 25 per cent overvalued.

Interest rates are not expected to increase in the coming year, but analysts noted that Canadian households are already at record high debt levels and the growth of both jobs and income has stalled.

However, while the risk of a downturn is higher now than a few years ago, there are significant differences in Canada’s market that would prevent a U.S.-style collapse, Nixon said.

A housing bubble in the U.S., caused in part by years of easy credit, burst during the recession and the market there has yet to recover.

The ensuing financial catastrophe south of the border actually created opportunities for Canadian banks looking to expand their U.S. presence as it wiped out competition for banks like TD, said its CEO, Ed Clark.

Meanwhile, Clark said it is a little “eerie” that many of the macroeconomic worries, such as signs of high consumer debt and the impact of slowing GDP growth, have yet to translate into higher provisions for credit losses or impact the bank’s balance sheets.

But Clark said he believes 2012 is “going to be a pretty tough year” due to some of those macroeconomic concerns.

Nixon said he is seeing a slowdown in consumer borrowing, but that he expects growth in commercial loans to pick up some of the slack.

However, given that the ratio household net debt to income levels sits at a historic 150 per cent – meaning mortgage and other debts are 1.5 times a Canadian household’s average income – it would be risky if debt levels rise further.

All three CEOs assured the business audience that they have little exposure to lending in the overbuilt condo market.

However, at least one banking analyst foresees some trouble ahead for Canadian banks.

“Canadian consumers have become more leveraged over the past several years … leaving themselves and therefore banks more susceptible to housing price corrections, interest rate shocks and other negative macroeconomic developments,” Moody’s senior analyst David Beattie said Tuesday.

“Should economic conditions deteriorate, consumer credit exposure will become a credit negative for the more aggressively positioned banks.”

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Companies that offer defined benefit pensions may face rising costs this year and could end up asking regulators for relief, according to a report by human resources consulting firm Aon Hewit on Friday.

The firm’s assessment is just the latest to predict a tough time for defined pension plans in 2012 as a result of lower returns on investments and rock bottom interest rates, which increase liabilities for plans.

Andre Choquet, an investment consultant with Aon Hewitt, said there is already talk in Quebec and Manitoba of the provincial governments providing funding relief for pension plans in those provinces.

He said some companies will be in more difficulty than others because of the pension plan may have “a significant impact on cash flows and balance sheet formation.”

“Even if those plans are closed, they have a legacy liability that has accumulated over the past and they might be in a deficit situation too.”

Choquet said that 96 per cent of the roughly 150 pension plans included in the Aon Hewit review were in a deficit, regardless of industrial sector, and the deficits were bigger than a year earlier.

Aon Hewitt said the median pension solvency funded ratio – the ratio of the market value of a plan’s assets to its liabilities – is approximately 15 per cent lower this year than at the start of 2011.

As a result, plan sponsors that file an actuarial valuation this year will need to add more cash to comply with minimum funding rules.

Several of corporate Canada’s biggest names have spent hundreds of millions to shore up their defined benefit pension plans in recent years.

In November, Canadian Pacific Railway Ltd. (TSX:CP) issued US$500 million in debt securities in the United States to help reduce its Canadian defined benefit pension deficit, while Canadian National Railway Co. (TSX:CNR) said in October it would make a $350-million pension contribution for 2011.

Because pension contributions are tax deductible, CP said at the time the net impact of the debt offering and the voluntary prepayment was expected to add to its earnings.

BCE (TSX:BCE) made a $750 million voluntary payment on its defined benefit pension plan in December, while Telus (TSX:T) said it would make a $100-million voluntary contribution to its pension fund early in 2012.

BCE estimated the contribution would save about $170 million on its cash taxes, while Telus estimated its contribution would reduce the company’s taxes by about $25 million.

Air Canada (TSX:AC.B) required a special regulation from the federal government allowing it to eliminate its pension deficit over a longer period than usual during its restructuring under court protection from creditors.

Choquet noted that funds with more bonds than stocks did better than those that were more aggressive last year, which saw the S&P/TSX composite index drop more than 10 per cent.

The poor stock market performance contributed to a reduced solvency position for the pensions in Aon Hewitt’s study.

Increasing investment in bonds to 60 per cent from 40 per cent would have meant a drop to only a 71 per cent solvency ratio, rather than 68 per cent. The solvency ratio had been about 83 per cent a year ago.

“Defined benefit plans are viable and affordable options for employers, but because of today’s economic uncertainty it requires employers to be clear about the amount of risk they are willing to assume,” he said.

“If you’re taking less risk, there is less chance of being in a worse situation going forward, but you may not be benefitting from an upside much going forward as well … If the stock market increases by a significant amount you may not benefit as much as you would have had, had you taken more risk.”

Choquet recommended a better match between bond and liability duration, noting that pension plans typically invest in universe bonds, with terms of mainly between five and 10 years.

He also suggested that plans look to reduce risk as their funded status improves by gradually increasing their allocation to bonds.

In Canada, only about four in 10 workers have defined benefit plans, which seek to guarantee a set amount of income on retirement. Many companies have switched to defined contribution plans in which the eventual payout is determined by the investment performance.

The Mercer Pension Health Index released earlier this week showed that despite a rebound in stock markets in October, the solvency of most Canadian pension plans failed to improve in the fourth quarter due to a further drop in federal bond yields. The Mercer index has fallen 13 per cent to 60 in the past year, measured against a model reading of 100 for pension solvency.

Meanwhile, pension consulting firm Towers Watson said the deteriorating health of Canadian pensions in 2011 is likely to convince more employers to shift burdens to employees this year and force an increase in retirement ages.

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Canada’s banks have been put on notice they will soon be banned from getting into the life annuity business.

Finance Minister Jim Flaherty issued a notice late Friday afternoon that he will introduce legislation to prevent banks from selling financial products that function like annuities, normally administered by insurance companies.

In the announcement, the minister points out that under current law banks are already prohibited from promoting or selling annuities, which are federally policed when offered by insurance companies.

“However, in recent years, some banks have introduced products that perform the same or similar functions as life annuities. These products are not subject to the same regulatory standards as those sold by insurance companies,” the statement notes.

Only one bank – the Bank of Montreal – currently offers an annuity-like product, but analysts say the vehicles which offer seniors a steady and predictable stream of income for life are likely to gain in popularity as baby boomers enter their retirement years.

BMO advertises it’s “Lifetime Cash Flow” as a product that offers “peace of mind in retirement by providing steady payments that are guaranteed for life.”

“Any time you have a guarantee of a payment for life in exchange for a payment up front, it sounds a lot like a life annuity to us,” said Frank Swedlove of the Canadian Life and Health Insurance Association, which launched a complaint to the supervisor of financial institutions.

Swedlove said the Royal Bank had also announced it was looking into the vehicles.

Flaherty’s announcement Friday did not say how quickly legislation would be introduced. The government recessed Parliament this week until January 30.

The release said the legislation would only apply to new financial products and would not be retroactive on previously sold contracts.

A spokesman for the Canadian Bankers Association said the banks would comply with the legislation.

“However, our position has always been that consumers benefit when there is choice and competition in the insurance market and we do not believe that restrictions should be placed on that choice and competition,” said Robin Walsh, a spokesman for the CBA.

Friday’s announcement is not the first time Flaherty has acted to keep the operations of Canada’s banks and insurance companies separate.

In October, after repeated warnings, the Finance Department posted new regulations to prevent banks from advertising their in-house insurance products on web pages.

“We want to ensure the Bank Act reflects the new reality of online banking, to avoid attempts by banks to do on their websites what they are prohibited from doing at their branches,” Ted Menzies, the minister of state for finance, said at the time.

In Friday’s statement, Flaherty struck a similar tone.

“Since taking office, this government has taken steps to clarify the separation of banking and insurance activities,” he said. “This will ensure the business of insurance continues to be subject to the appropriate rules and regulations.”

The minister said the legislation would be tabled “as soon as possible.”

You might also be interested in: Ottawa to prohibit banks from advertising insurance products on web sites

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The Bank of Canada is warning of a global epidemic of contagion spreading from Europe, saying Canada’s economy and financial systems are already being impacted and risks of further damage are elevated.

The central bank’s semi-annual financial stability review released Thursday states bluntly that Canadians need to start worrying about the worsening debt mess in Europe and its ability to hit home hard.

“The (bank’s) governing council judges that the risks to the stability of Canada’s financial system are high and have increased markedly over the past six months,” it stated.

“Since June, the global retrenchment of risk associated with the European crisis has indeed resulted in a significant correction in the prices of equities and other risky assets, as well as a widening of credit spreads in Canada.

“Should the crisis deepen and spread further to the larger European economies, transmission to Canada could become more severe…. An adverse outcome for Europe would also raise the risk of a significant impairment of funding conditions for Canadian institutions.”

Frankly, it says, measures currently undertaken to bring the European debt crisis under control “have repeatedly fallen short of what is needed.”

European leaders were meeting later in the day for yet another attempt to come up with a solution to a debt crisis that have put countries in the eurozone, including Germany, on watch for a debt rating downgrade.

The TD Bank said in an analysis that the central bank’s gloomy report “reinforces” their pessimism about Europe, and that global growth will worsen as risks continue to rise.

“Canada will largely be impacted by falling commodity prices, a hit to confidence and weaker export growth. Nonetheless, these events are likely to push the Canadian unemployment rate higher and asset values lower – hitting the household sector at a time when they have become more vulnerable to such shocks,” said TD economist Diana Petramala.

As it has in the past, but this time with more urgency, the bank report flagged record high consumer debt, warning that a shock such as falling house prices or a sharp rise in unemployment could push many Canadians to the point they can no longer make debt payments.

The bank conceded that the growth of mortgage debt has slowed, particularly after March’s clamp-down by Ottawa reducing top amortization periods from 35 to 30 years.

But it noted that credit accumulation is still rising faster than incomes, which have slowed, and that October saw a rebound in mortgage growth.

“The rising indebtedness of Canadian households in recent years has increased the possibility that a significant proportion of households would be unable to make debt payments in the event of an adverse economic shock,” it warns.

Recently, the International Monetary Fund warned Ottawa it may have to lean again on mortgage rules to slow down Canadians eager to buy while interest rates are at floor levels. The Bank of Canada doesn’t go as far, but possibly as far as it can in saying that “continued vigilance is warranted.”

Still, the expectation is for the housing market to cool and fresh data released Thursday morning appeared to back the bank’s bet. Canada Mortgage and Housing Corporation reported seasonally adjusted annual rate of housing starts plunged to 181,100 units in November from 208,800 the prior month. The new level was more in line with what analysts would consider sustainable.

The bank says the condominium market in particular may be due for a correction.

“The supply of completed but unoccupied condominiums is elevated, which suggests a heightened risk of a correction in this market,” it said.

A “correction” usually refers to a drop in prices – often sharp and sudden – from an exaggerated high. An especially fast and quick correction is often described as a bubble because of the suddenness of the collapse.

Still, with rates at historical lows, CIBC economist Benjamin Tal said he wouldn’t be surprised if mortgage credit growth resumes again.

Tall said Bank of Canada governor Mark Carney is obviously frustrated that the economy is far too weak to raise interest rates, a move that would dissuade borrowing because of the higher cost.

“Their hands are tied. This means you have a much longer duration of extremely low interest rates and people can be blinded by those and continue to take out mortgages and create a housing market bubble,” he said.

Tal said Finance Minister Jim Flaherty may be forced to clamp down further on eligibility rules for mortgages, another way to make house purchases less affordable. Flaherty has already tightened the rules twice.

Most of the concern in the report stems from the European situation worsening. But the potential for an “adverse shock” is increasing, the Bank of Canada said, and risks are not all restricted to Europe.

The central bank said financial markets are also keeping a wary eye on Japan and U.S. sovereign debt, particularly after August’s debt-ceiling fiasco in Washington that underlined the political dysfunction in the capital.

There is a “small but significant risk,” the bank says, that investors will demanding higher rates for bonds issued by the two governments.

The bank made it clear that Canada’s problems to date are of a factor lower than those faced by European nations and the United States.

While financial conditions have tightened, Canadian banks still have access to funding through wholesale markets.

Canadian banks also have an advantage in that they are well capitalized and have little direct exposure to European debt. Exposure ranges from virtually zero in the case of Greek and Portuguese debt, to a high of 3.4 per cent of capital with respect to Italy. That compares to exposure rates as high as 154 per cent and 193 per cent that German and French banks have to Italian debt.

But the report warned that Canadian banks are not out of wreckage range should Europe’s financial system crash.

“Should the crisis deepen and spread further to the larger European economies, transmission to Canada could become more severe through the credit and funding channels. Indirect credit exposures could also become more important – for example, via the significant exposure of German and French banks … or in a more extreme case, if U.S. banks become affected.”

The review gave no hint about the bank’s interest rate outlook in Canada, but made it clear it is uncomfortable with rates being so low for such an extended period.

The bank said low interest rates and the weak performance of markets are putting the squeeze on insurance companies and pension plans, which are at a higher risk of being unable to meet their financial obligations.

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As the Grey Cup heads to Vancouver this weekend, the city is cashing in on football. Not only will there be an influx of fans bolstering the local economy but the presence of a team in the region has long-lasting economic effects.

There are currently eight teams in the Canadian Football League: the B.C. Lions (playing in Vancouver), the Edmonton Eskimos, the Calgary Stampeders, the Saskatchewan Roughriders (playing in Regina), the Winnipeg Blue Bombers, the Toronto Argonauts, the Hamilton Tiger Cats and the Montreal Alouettes. But does it make financial sense to have more teams in the league?

A Conference Board of Canada analysis  says that six Canadian cities – Ottawa, Quebec, London, Kitchener-Waterloo-Cambridge, Halifax and Moncton – all have the necessary economic market conditions to make a CFL team potentially viable in those markets.

“There is definitely room for more than eight teams in the Canadian Football League, based on our analysis of the population size, income levels and corporate headquarters of potential markets,” said Mario Lefebvre, Director, Centre for Municipal Studies. “Market conditions are fundamental to the viability of any professional sports franchise. However, when considering future CFL franchises, new or significantly upgraded playing facilities and dedicated ownership are also crucial factors in the potential growth of the league.”

The Conference Board’s Playing in the Big Leagues series has identified four market pillars for successful professional sports teams:

• Population size – a market needs to be both large enough and growing in population
• Income- a market must have a relatively high disposable per capita income
• Corporate presence – corporations can be tapped for sponsorship and high-end ticket sales; and
• A level playing field – since the CFL plays only in Canada, exchange rates and taxation issues are minimal factors for franchise success.

The Conference Board says that Ottawa’s population size, income and corporate presence makes it an ideal city to have an additional CFL team – again. (The city has had two different football franchises in the last 15 years, though a new plan puts a team back in the national capital in 2014.)

On the basis of population, income and corporate headquarters, Québec City would appear to be next in line for a CFL franchise. The Québec City economy has been one of the best performing in the country (east of Saskatchewan) over the past decade. Quebec City also has shown substantial support for its highly-successful Rouge et Or football team at Université Laval. But the focus in Québec City is on acquiring a National Hockey League team – it is therefore less likely that resources can be directed toward the goal of obtaining a CFL franchise, at least over the next few years.

Two more potential CFL markets are located in Canada’s Atlantic provinces: Halifax and Moncton. With a population of slightly over 400,000 people, Halifax would be a relatively small urban market for the CFL. And Moncton itself is home to only a little over 125,000 residents as per the 2006 Census, making it even smaller than the league’s current smallest market – Regina.

“For both Halifax and Moncton, the local markets alone are not large enough to ensure long-term viability. If and when a team comes to the Maritimes, its ownership will have to work especially hard to market the team as a regional franchise,” said Lefebvre.

Moncton, however, has gained the nickname of “Hub City” because of its central location in the region. It also has a playing facility that is almost CFL-ready, Moncton Stadium, which has hosted CFL regular season games the past two years. For these reasons, the Conference Board sees Moncton as having an edge in obtaining a CFL franchise for Atlantic Canada.

London and Kitchener-Waterloo-Cambridge (KCW) also have market conditions that would put them in the discussion about franchises. Of the two, London has a larger stadium (although still not CFL-calibre) and is a little farther geographically than KCW is relative to the existing franchises of Toronto and Hamilton. Kitchener has the advantage of a wealthier market when it comes to income per capita.

Neither city, however, should be regarded as high probabilities for a franchise. While the Conference Board analysis indicates that London has more in its favour than KCW, another CFL franchise in Southern Ontario is unlikely. Both London and KCW are within a couple hours’ drive of two CFL teams (Hamilton and Toronto) and two National Football League teams (in Buffalo and Detroit), so an additional franchise in Southern Ontario could take the area beyond its “football saturation point”.

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As we wish our American friends and family a very happy Thanksgiving today, many Canadians have adopted part of the festive routine: Black Friday and Cyber Monday shopping sprees.

Black Friday, the mega-shopping event that occurs the day after American Thanksgiving each year in bricks-and-mortar stores and its online cousin Cyber Monday, where hot deals  heat up the Internet, have officially become Canadian.

According to PayPal Canada, 52 percent of Canadians are now aware of Cyber Monday – up 24 percent from 2010.

PayPal data shows that this growing awareness is translating into changing shopping habits, as more Canadians than ever are choosing to escape the mall and shop online to save time and money. In 2010, there was a 37 per cent increase in the number of Cyber Monday online shopping purchases made by PayPal Canada customers compared to 2009.

“In 2010 Canadians made more than 8,600 purchases an hour with PayPal on Cyber Monday,” said Nicky Mezo, head of marketing, PayPal Canada. “Savvy Canadian shoppers know you no longer have to drive across the border and survive the mayhem of Black Friday to get the best deals on gifts this holiday season. Canadians are choosing to escape the mall and shop online from retailers here in Canada and in the United States to save time and money this holiday season.”

With a steady increase in Cyber Monday transactions, Canadian retailers are adjusting e-commerce strategies to capture a bigger portion of the consumer holiday spending dollar. Canadian retailers like Toys”R”Us Canada, Sport Chek, and The Home Depot Canada are planning special promotions to attract Canadian Cyber Monday shoppers.

American retailers are also taking notice of what’s happening in Canada. FiftyOne Global Ecommerce (“FiftyOne”), a technology and services company that enables leading US retailers to market, sell and fulfill merchandise internationally, tracks global changes in shopping habits around the holidays.

In 2010, FiftyOne found a 115 per cent average daily lift in Canadian sales during the four-day Black Friday/Cyber Monday holiday. The average order value over the weekend was US $186. These results are leading several US retailers to create offers specifically for Canadian online shoppers.

Will you be participating in Black Friday or Cyber Monday deals? What’s the best deal you’ve spotted so far?

You might also be interested in: PayPal’s tips to avoid online fraud 

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On November 23, Finance Minister Jim Flaherty introduced the Financial System Review Act, aimed at ensuring Canada’s financial system remains strong and secure.

“Canada’s sound financial system is a model for countries around the world,” said Flaherty in a statement. “Indeed, for the fourth year in a row, Canada was recently ranked as having the soundest banks in the world by the World Economic Forum. The Financial System Review Act will ensure our financial system continues to be secure for Canadians and a fundamental strength for our economy.”

The Act includes all federally-regulated financial institutions including domestic and foreign banks, trust and loan companies, insurance companies and cooperative credit associations.

The Act includes measures to:

-          Update financial institutions legislation to promote financial stability and ensure Canada’s financial institutions continue to operate in a competitive, efficient and stable environment;

-          Fine-tune the consumer protection framework, including enhancing the supervisory powers of the Financial Consumer Agency of Canada; and

-          Improve efficiency by reducing the administrative burden on financial institutions and adding regulator flexibility.

The government reviews legislation regarding federally-regulated financial institutions every five years. The last review was completed in 2007. The current five-year review was launched on September 20, 2010. The Bank Act, Cooperative Credit Associations Act, Insurance Companies Act and Trust and Loan Companies Act must be renewed by April 20, 2012, the statutory sunset date.

“It is important that legislation be periodically reviewed so that it keeps up with the changing environment,” says Frank Swedlove, President of the Canadian Life and Health Insurance Association (CLHIA). “We are pleased that the government appears to be on schedule to meet the sunset deadline of April 20, 2012.”

More backgrounder information from the Department of Finance is as follows:

KEY LEGISLATIVE MEASURES

RESPONDING TO CHANGES IN THE SECTOR

• The Government is improving the ability of regulators to share information efficiently with international counterparts.
• A change in the priority status of segregated fund policies in insolvency situations will facilitate timely transfer, consistent with life and health insurance policies.
• The Government is increasing the widely held ownership threshold for large banks from $8 billion to $12 billion to help them keep pace with the growing financial sector.
• To ensure financial institutions continue to grow on a sound basis, the Minister will approve substantial foreign acquisitions.
• Federal financial institutions will be provided with enhanced flexibility to issue shares to foreign banks owned by foreign governments.

ENSURING ACCESS TO BANKING

• It will be clarified that Canadians, including bank customers, are able to cash Government cheques under $1,500, free of charge, at any bank in Canada.

LEVELLING THE PLAYING FIELD

• Federal financial institutions will be able to use foreign operations to engage only in permitted activities in Canada.

PROMOTING COOPERATION

• Federal credit unions will vote with the cooperative class in the governance of the Canadian Payments Association.
• Competition and innovation will be promoted by enabling cooperative credit associations to provide technology services to a broader market.

ENHANCING THE SUPERVISORY POWERS OF THE FINANCIAL CONSUMER AGENCY OF CANADA

• The maximum penalty for a violation of a consumer provision will be increased, consistent with penalties for other violations under financial institutions statutes.

IMPROVING EFFICIENCY

• The Superintendent of Financial Institutions will have the authority to issue a certificate to assist financial institutions in documenting incorporation information.
• The administrative burden will be reduced for federally regulated insurance companies offering adjustable policies in foreign jurisdictions by removing duplicative disclosure requirements.
• Mutual funds controlled by insurance companies through investments made from segregated funds will be permitted to hold market-indexed shares in managing life insurance companies.
• Flexibility will be provided in adjusting to new terminology under the International Financial Reporting Standards in order to continue to promote prudential objectives.
• Future adjustments on the limits on transfers to shareholders from participating policy accounts will be facilitated by adding regulatory flexibility.
• The Canada Deposit Insurance Corporation Act will be fine-tuned to enhance the corporation’s ability to protect insured depositors and manage the resolution of a member institution.
• Limited testimonial immunity will be provided to the Superintendent of Financial Institutions and the Commissioner of the Financial Consumer Agency of Canada, as well as their employees and agents, to enhance operational efficiencies and protect the confidentiality of information.

CLARIFYING INTENT

The proposed bill:

• Clarifies the order of priorities where multiple security interests, including those taken under the Bank Act and under provincial legislation, are taken on the same collateral.
• Clarifies that derivatives can be cleared by a clearing and settlement system.
• Confirms that banks can have an asset manager who also acts as a trustee of a mutual fund trust.

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The weakened economy may deter some Canadians from making charitable donations as the holiday season approaches, but it isn’t stopping the wealthiest from digging even deeper to help those in need.

The founder of Canadian IT giant CGI is among those who is sharing his good fortune by donating millions more to charity this year.

Serge Godin is donating more than $14 million to a foundation he created 12 years ago by handing over 2.2 per cent of the stock options he holds in his Montreal-based company.

“We’ve been very fortunate here in creating this company and I thought it was normal to try and give back to the community in which we are living,” he said in an interview.

While many company stocks have taken a beating since the 2008 recession, CGI’s shares have gained about 66 per cent, providing Godin more opportunity to give.

Since creating Fondation Jeunesse-Vie in 2000, the 61-year-old has donated about $25 million to the charity that help youth struggling with drugs and mental illness. He plans to give up to about $5 million a year for the rest of his life.

Donations have historically been in cash. But upon the advice of tax specialist Serge Bilodeau – father of Olympic ski moguls champion Alexandre – he’s begun handing over shares of his publicly traded company in order to reduce his tax burden and funnel more to the charity.

“It’s a good idea, because the amount for donors is the same, but more money is available to give to people in need.”

While cash is still king for most charitable donations, many Canadians are giving stock, art, land, life insurance and other assets.

Some estimates suggest Canadians have made more than $1 billion worth of non-cash donations since the federal government changed the tax laws in the 2006 budget to eliminate capital gains taxes on securities donations.

The United Way of Toronto says it received $26 million in securities from nearly 500 donors in the first year after the change. That amount has stabilized at $10 million, or about 10 per cent of the $110 million worth of donations it received last year.

“The tax benefits are certainly having a very big benefit on local charitable organizations,” says Julia Gorman, vice-president resource development.

Giving publicly traded securities, including shares, bonds and mutual funds, to a registered charity allows donors to reduce their taxable income to help offset other taxes on capital gains.

Any excess can be carried forward for five years.

Donating securities-in-kind can save donors up to about $1,800 for each $10,000 donation, depending on factors such as the original cost of the security.

Anyone can donate securities, but the typical donor of securities is someone with big capital gains after selling a business created over decades of work, says Marvi Ricker, managing director of philanthropic services at BMO Harris Private Banking.

They feel grateful and want to share their good fortune. Like Godin, many create foundations to involve their families in giving.

She suggests donors large and small plan their giving by involving a financial adviser to maximize the tax benefits of the gift.

As the gap between rich and poor grows, the wealthy have more available to share and people like U.S. billionaires Bill Gates and Warren Buffet are encouraging them to give more, she said.

“Talking to my clients, a lot of people have been saying exactly what Buffett has said, namely that he wants to leave his children only so much.”

Both billionaires give away millions each year and have vowed to distribute the vast majority of their considerable fortunes.

While the type of donation may have changed, a recent survey sponsored by BMO found that 71 per cent of Canadians planned to same or more to charities next year.

That appears to be good news for charities that have taken a hit over the past few years as economic turbulence has reduced donations.

Statistics-Canada said donations dropped five per cent in 2008, the largest decline in 40 years. They fell another three per cent in 2009.

The number of Canadians donating is declining but those who give are giving higher amounts, said Gorman.

The average gift received from the United Way jumped to $505 in 2010 from $448 two years earlier.

“They do realize it’s the most vulnerable individuals and families in our communities that will suffer the most from lost employment and decreasing government support of some of the important programs.”

Ricker said there could be a little softening of donations from the general public this year, but among those with much to give, there’s no falling off.

As the key holiday donation period gets underway, charities are anxiously watching the public mood.

“We, like any other charity out there, are a little worried about what may or may not happen, but based on the history of people giving to the Salvation Army, we’re cautiously optimistic that people will come through,” said Andrew Burditt, national director of marketing and communications.

The large charity hopes to collect more than $19 million again this year from its annual kettle campaign, which began Tuesday.

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