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Retirement Savings Plan

A Registered Retirement Savings Plan or RRSP is a type of Canadian account for holding savings and investment assets. Introduced in 1957, the RRSP's purpose is to promote savings for retirement by employees. It must comply with a variety of restrictions stipulated in the Canadian Income Tax Act. Rules determine the maximum contributions, the timing of contributions, the claiming of the contribution tax credit, the assets allowed, and the eventual conversion to an RRIF (Registered Retirement Income Fund) in retirement. Global Pacific can offer access to RRSP's in the form of guaranteed investment certificates (GICs) and segregated funds.

Types of RRSPs

RRSP accounts can be setup with either one or two associated individuals:

Individual RRSP

An individual RRSP is associated with only a single individual, termed an account holder. With an individual RRSP the account holder is also called a contributor, as only they contribute money to their RRSP.

Spousal RRSP

A Spousal RRSP allows a higher earner, termed a spousal contributor to contribute to an RRSP in the spouse's name. In this case it is the spouse who is the account holder. The spouse can withdraw the funds, after a holding period. A spousal RRSP is a means of splitting income in retirement. By dividing investment properties between both spouses each spouse will receive half the income, and as a result the marginal tax rate will be lower than if one spouse earned all of the income.

Group RRSP

In a group RRSP the employer arranges for employees to make contributions as they wish through a schedule of regular payroll deductions. The employee can decide the size of contribution per year and the employer will deduct an amount accordingly and submit it to the investment manager selected to administer the group account. The contribution is then deposited into the employee’s individual account and invested as specified. The primary difference with a group plan is that the contributor realizes the tax savings immediately, instead of having to wait until the end of the tax year.

Contributing

A RRSP deduction limit is the maximum amount of RRSP contributions that can be claimed on a tax return for a given tax year.

Maximum Annual RRSP Contribution Limits

Tax Year

Contribution Limit

2017

$26,010

2016

$25,370

2015

$24,930

2014

$24,270

2013

$23,820

Your allowable RRSP contribution for the current year is the lower of:

  • 18% of your earned income from the previous year, or
  • The maximum annual contribution limit for the taxation year, or
  • The remaining limit after any company sponsored pension plan contributions or pension adjustment (PA), and past service pension adjustment (PSPA), plus pension adjustment reversals (PAR).

Earned income includes salary or wages, alimony received, and rental income, among other income sources, but does not include items such as investment income.

Should you wish to learn more about contributing to your own savings or investment account, please contact us or your Advisor today.