Leveraged Supplementary Retirement Account - Standard Life

Leveraged Supplementary Retirement Account
Sources of retirement income
Sources of Retirement Income
1. Registered Plans
There are a number of retirement savings
vehicles that are regulated by tax and pension
rules. There are tax-assisted programs to which
individuals and/or their employers might
contribute to help accumulate a retirement nest
egg. These would include:
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Registered Pension Plans (RPPs),
Deferred Profit Sharing Plans (DPSPs), and
• Registered Retirement Savings Plans (RRSPs)
The Income Tax Act (“ITA”) places limits on
the “tax assistance” for registered plans. “Tax
assistance” means the tax advantages that an
employer and/or employee will receive because
contributions are tax deductible and the
income/growth is not taxed until withdrawal
from the plan.
2. Government Programs
There are also government-administered
programs that provide retirement income based
on employment and/or residence in Canada.
These programs include:
• Old Age Security (OAS) and, on a needs basis,
Guaranteed Income Supplement (GIS)
• Programs established by the provinces
(e.g., Ontario’s Guaranteed Annual Income
System (GAINS))
• Canada Pension Plan (CPP) and Quebec
Pension Plan (QPP)
4 Standard Life
3. Non-Registered Plans
Once contributions to (or benefits received from)
tax-assisted plans are maximized, those who want
to ensure additional sources of funds are available
in retirement must find alternate vehicles.
Non tax-assisted programs that an individual or
their employer might establish which would be a
source of retirement income include:
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Various stock plans
Various profit sharing plans
• Personal savings vehicles/investment portfolios
These non-registered savings mechanisms often
produce income that is taxable annually. A tax
deferral is available for investment in stocks that
are held for the long term rather than being
traded from time to time. As long as no gain is
realized, no income tax is due. However, since
most people use mutual funds (or segregated
funds) as their vehicle for investing in stocks, and
since the underlying assets are generally actively
traded, gains are realized each year, triggering
taxation. Regardless of which approach is used,
there will come a time when the underlying stocks
must be liquidated, either to produce an income
or on the death of the owner or spouse, thus
realizing the gains and triggering taxation.