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A registered Retirement Savings Plan (RSP) is a personal
savings plan registered with the Canadian federal
government allowing you to save for the future on
a tax-sheltered basis.
What makes RSPs special is that your contributions
to it are tax deductible and your portfolio grows
tax sheltered. If you are under 70 years of age
and earn income, we encourage you to take advantage
of the benefits an RSP can offer.
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What
are the Benefits of RSP?
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While designed specifically
as a retirement vehicle, an RSP has benefits throughout
your lifetime.
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By contributing to
an RSP throughout your working career, you'll
realize immediate tax benefits at a time when
your income is generally highest. The total
amount of your annual contribution can be deducted
from your gross income at tax time, reducing
the amount you pay in income tax that year.
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The income earned
in your RSP is not taxed until it is withdrawn.
While your investments sit in your RSP their
growth is tax sheltered and so the total value
may grow more quickly. |
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By the time you begin to withdraw
the funds at retirement, you will probably be
in a lower tax bracket than during your earning
years. Funds withdrawn at that time will benefit
from this lower tax rate. |
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Can
I withdraw money from my RSP?
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You
can withdraw money from your RSP for the following
reasons:
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Emergencies - Your
RSP holdings can be used to cover an emergency
situation. However, there is a tax consequence
to doing so and an impact on your retirement
plan. Any withdrawal is considered taxable income
for the year and a withholding tax will be charged
upfront when you withdraw the funds |
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Home Buyers Plan
- The Home Buyer's Plan allows you to borrow
funds from your RSP to purchase your first home.
If you qualify, you and your spouse can each
borrow up to $25,000 - a total of $50,000 -
from your RSPs to use as a down payment. The
funds withdrawn are not subject to withholding
taxes, nether are they included in participants
income. |
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Lifelong Learning Plan - The
Lifelong Learning Program allows you to withdraw
up to $10,000 per calendar year from your RSPs
to finance full-time training or post-secondary
education for you or your spouse. The funds
withdrawn are not subject to withholding taxes,
nether are they included in your income. |
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Every individual
who works, files a Canadian income tax return, and
looks forward to secure retirement should consider
having an RSP.
Here's why:
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People, who earn
income through their employment or self-employment,
can reduce their annual tax bill while saving
for their future through an RSP. |
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For people who have a company
pension plan, RSPs add extra comfort that their
retirement needs are met; for those that don't
have company pension plans, RSPs may be the
foundation for funding their retirement. |
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Married couples where one spouse
earns more income than the other can reduce
their combined tax burden through a spousal
RSP. At retirement an income-splitting strategy
can be applied to reduce overall tax when the
funds are withdrawn. |
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If you are planning on purchasing
your first home or are interested in continuing
your education you can contribute to an RSP
then use these funds, as a source of financing. |
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If you anticipate fluctuations
in your income because of maternity leave, career
change or employment interruptions, the funds
in an RSP are always available to you. |
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What Types of RSPs are available?
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| RSPs
can be for an individual only or placed in the name
of a spouse.
Individual RSP - The most common type of RSP is a
plan that is registered in the name of the person
contributing to it. The investments held in the plan
and the tax benefits derived from it are the contributor's.
Spousal RSP - In a spousal RSP, the plan is registered
in the name of the spouse of the person contributing
to the plan. The spouse owns the investments held
in the plan. The tax deduction flows to the contributor.
The key reason for setting up a spousal RSP is to
facilitate income splitting. Income splitting is
the transferring of money to a lower-income-earning
spouse, so that in the future, income is taxed at
a lower tax rate
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Can
I have a Self-Directed RSP?
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| Currently
we do not offer Self-directed RSP.
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How
much can I contribute annually?
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You may contribute to your RSP until December 31 of the year in which you reach age 71. The following limits and deadlines apply annually.
RSP Contribution Maximum - The maximum annual contribution limit is 18% of 2008 income with a limit of $20,000 in the year 2009.
Your allowable RSP contribution for the current year
is the lower of:
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18% of your earned
income from the previous year, or |
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The maximum annual contribution
limit for the taxation year, or |
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The remaining limit after any
company sponsored pension plan contributions
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Earned income includes salary or wages, alimony received,
and rental income, among other income sources but
does not include items such as investment income.
You'll find the exact amount you can contribute to
your RSP for the current year reported on the Notice
of Assessment from your previous year's tax return.
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I
have a company Pension Plan; can I still contribute
to an RSP?
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| As
a member of a company-sponsored registered pension
plan or deferred profit sharing plan, the amount that
you can contribute to your RSP must be reduced by
the total value of the pension credits you earned
for the year.
This amount is referred to as a pension adjustment
(PA) and it is reported on the T4 slip (Statement
of Remuneration Paid) that you receive from your employer.
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What
is the deadline for RSP Contribution?
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| Annual
Contribution Deadline - To be eligible for an RSP
deduction in a specific taxation year, you can make
contributions anytime during the year, or up to 60
days into the following year.
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What happens to my RSP when it's time to retire?
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Whether you are retired or you are still working, you may keep or withdraw/convert your RSPs anytime until the year in which you turn 71 at which time you may choose from the following options: (1) withdraw your RSPs, (2) transfer your RSPs to a Retired Income Fund (RIF), (3) use your RSPs to purchase an annuity for life or, (4) use your RSPs to purchase an annuity spread over a number of years.
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What
happens to my RSP when I die?
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| The
value of your RSP is paid to the beneficiary you have
designated. If you have not designated a beneficiary,
it is paid to your estate. In certain cases, including
if your beneficiary is your surviving spouse or common-law
partner, your RSP may be transferred to them on a
tax-deferred basis. You should consult your District
Taxation Office or legal and tax advisors for more
specific information.
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Does
it make a difference if I contribute regularly to
my RSP?
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| Contributing weekly, biweekly or monthly is an excellent way to budget for your RSP contribution. Making regular contributions avoids the last-minute scramble for a large, lump sum contribution.
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you don't contribute the maximum allowable to your
RSP in any year, you can carry the unused portion
forward indefinitely. Any amounts "carried forward"
should be reflected in the statement provided by Canada
Customs and Revenue Agency with your "Notice
of Assessment".
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I
didn't maximize my RSP Contribution last year. Is
there anything I can do?
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| If
you don't contribute the maximum amount allowable
to your RSP in any year, you can carry the unused
portion forward indefinitely. Any amounts "carried
forward" should be reflected in the statement
provided by Canada Customs and Revenue Agency with
your "Notice of Assessment".
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Does it make sense to borrow money for my RSP contribution?
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| Your
RSP contribution could be the most important investment
you make every year. So even if you haven't got cash
on hand now, it can pay to borrow with an RSP Loan
or Line of Credit. But don't forget, credit applications
are subject to meeting the financial institution's
lending criteria, and using borrowed money to finance
the purchase of securities involves greater risk than
a purchase using cash resources only. If you borrow
money to purchase securities, your responsibility
to repay the loan and pay interest as required by
its terms remains the same even if the value of the
securities purchased declines.
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Can I deduct the loan interest as with other investment
loans?
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| No.
RSP loan interest is not is not tax deductible.
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What is the over-contribution limit?
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| There
may be years when you have more cash available for
your contribution than in other years. If your annual
contribution exceeds your contribution limit, RSP
regulations permit an over-contribution balance totaling
not more than $2,000. (If your over-contribution exceeds
$2,000, you may be assessed a penalty of 1% per month
on the excess amount.) While you won't get a tax deduction
for any over-contribution in the year it is made,
you can claim it as part of your contribution limit
in subsequent years.
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What is the foreign content limit for RSPs?
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The foreign property limit of 30% you were allowed for foreign property in RSPs or RRIFs, is cancelled effective January 1, 2005. This allows more international diversification opportunities for retirement investments.
Note:
In some cases, a share or debt of a Canadian investment becomes a foreign property for an RSP when the shares or debt derive their value mainly from foreign property.
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What is the Home Buyers Plan (HBP)?
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| The
HBP is a program that allows you to withdraw up to
$25,000 from your registered Retirement Savings Plans
(RSPs) to buy or build a qualifying home. However,
the program sets out certain conditions for participation.
If an individual meets all the applicable HBP conditions,
the withdrawals will not have to be included in his
or her income, and the RSP issuer will not withhold
tax on these amounts. If you buy a qualifying home
with your spouse or common-law partner, or with other
individuals, each of you can withdraw up to $25,000.
Under the HBP, you have to repay all withdrawals to
your RSPs within a 15-year period. Generally, you
will have to repay an amount to your RSPs each year,
starting the second year after the funds are withdrawn,
until you have repaid the total amount you withdrew.
If you do not repay the amount due for a year, it
will have to be included in your income for that year.
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What is a Lifelong Learning Plan (LLP)?
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| The
Lifelong Learning Plan (LLP) allows you to withdraw
amounts from RSPs to finance training or education
for you or your spouse or common-law partner. You
cannot use the RSP funds to finance a child's education,
such as your child or the child of your spouse or
common-law partner.
You can make withdrawals from more than one RSP
as long as you are the annuitant (plan owner) of
each RSP. Your RSP issuer will not withhold tax
on these amounts. Although the maximum amount that
you can withdraw is $20,000, there is an annual
limit of $10,000. There is no limit on the number
of times you can participate in the plan over your
lifetime. Starting in the year after you bring your
balance to zero, you can participate in the LLP
again and withdraw up to $20,000 over a new qualifying
period. Generally, you will not be allowed to withdraw
funds from your locked RSP.
You do not have to include eligible withdrawals
in your income when you withdraw funds from your
RSP under the LLP; however, you must repay the amounts
over a specified period of several years.
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Online Banking
RSP
