Understanding the Basics - Servus Credit Union

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sixth year following the first withdrawal, whichever isearlier. A repayment may be made to the SaskatchewanPension Plan (SPP); however, the maximum contributionlimit is $2,500/year.Any amount not repaid as requested will be added to theincome of the planholder for that year. Special rules willapply if the RRSP funds are withdrawn and the studentdoes not complete the educational program.Before making a withdrawal for education, you shouldconsider the loss of the compounded earnings on thisamount for the period the funds will be out of your RRSPs.Even if you make the repayments as requested, theremay be a substantial reduction in the value of your RRSPsat retirement.You apply by completing CRA form RC96 with yourRRSP issuer. No withholding tax will be deducted froma qualifying withdrawal. A T4RSP will be issued to youin the year of withdrawal.Locked-in RRSPs/LIRAs/RLSPsThese are RRSP contracts that contain funds transferredfrom Registered Pension Plans (RPP) that are subject topension legislation. The Locked-in RRSPs are availablefor pension funds that are federally regulated and pensionfunds governed under the pension jurisdiction of BritishColumbia*. The LIRA is available for all other provincialpension jurisdictions. The RLSP is a Restricted Locked-inSavings Plan that is available under the Federal PensionBenefits Standards Act, 1985. A transfer from an RPP toan RLSP is not permitted. The RLSP can only accept fundsfrom a Restricted Life Income Fund (RLIF).Withdrawals from a Locked-in RRSP/LIRA/RLSP arenormally not permitted. There may be a minimum agerestriction to convert the funds to a retirement incomeoption and there may be restrictions to purchase alife annuity. Some pension jurisdictions will allow youto purchase a Life Income Fund (LIF) or a Locked-inRetirement Income Fund (LRIF) as an alternative to a lifeannuity. Saskatchewan pension legislation contains a SKRRIF as a retirement income option to replace LIF andLRIF (see page 33). Under the Federal Pension BenefitsStandards Act, 1985, the Restricted Life Income Fund(RLIF) is available in addition to LIF (see page 32).*Legislation proposed February 1, 2012 for British Columbia; when in forcecontracts will be referenced as LIRAs.UNDERSTANDING ALL THE BASICS 21
Is There Withholding Tax?Yes, when you withdraw money (excluding withdrawalsunder the Home Buyers’ Plan or Life Long Learning Plan)from your RRSP, government regulations require tax tobe withheld as follows:10% – on a withdrawal not over $5,00020% – on a withdrawal over $5,000(but not over $15,000)30% – on a withdrawal over $15,000Where more than one withdrawal is being made and thetotal amount to be withdrawn for the year is reasonablyknown in advance, the tax rate is based on the total of allwithdrawals.The amount of tax withheld will be reported to you on aT4RSP and should be claimed on the “Total income taxdeducted (from all information slips)” line of your tax return.You should remember that RRSP withdrawals are includedin your taxable income, so the tax withheld will notnecessarily cover the taxes payable due to the withdrawal.On the other hand, if you are not taxable, by filing a taxreturn you can receive a refund of the taxes withheld.If you are a non-resident when you withdraw funds,non-resident tax of not more than 25% will be deducteddepending on the tax treaty between Canada and yourcountry of residence.Can You Leave Funds in an RRSP Indefinitely?No, you must either purchase a retirement income optionor withdraw your funds before the end of the calendar yearin which you reach age 71.Designation of BeneficiaryNOTE: Throughout this booklet:– the term spouse can also be read as common-law partner(see definition on page 2)– the term spouse in the locked-in pension information also includes otherindividuals who have been given similar rights under applicable pensionlegislation– reference to spousal plan includes common-law partner plan22UNDERSTANDING ALL THE BASICS
Page 2 and 3: This Understanding All The Basics b
Page 4 and 5: Table of ContentsRRSPWhat is an RRS
Page 6 and 7: RRSPWhat is an RRSP?A Registered Re
Page 8 and 9: What is Earned Income?Your RRSP ded
Page 10 and 11: The greater the future benefits pro
Page 12 and 13: Part or all of your RRSP deduction
Page 14 and 15: Over-contributionsOver-contribution
Page 16 and 17: • Provincial legislation- The Alb
Page 18 and 19: Since mutual fund investments do an
Page 20 and 21: Back-End LoadInstead of a front-end
Page 22 and 23: Form T2205 is available at the Taxa
Page 24 and 25: Applying for Your Home Buyers’ Wi
Page 28 and 29: When Designating a Beneficiary on a
Page 30 and 31: Whatever method of designation you
Page 32 and 33: Is Retirement Income Taxable?There
Page 34 and 35: You cannot contribute directly to a
Page 36 and 37: Minimum Payment, Age More Than 77Fr
Page 38 and 39: Saskatchewan RRIF (SK RRIF)The SK R
Page 40 and 41: Indexed Life AnnuityThis increasing
Page 42 and 43: Who Sells Retirement Income Options
Page 44: ® HANDS & GLOBE Design is a regist

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