How to Transfer an RRSP
To move your registered retirement savings plans (RRSPs) from one financial institution to another or consolidate multiple RRSPs from different banks to one institution, you’ll need to move them via the RRSP transfer process. This ensures you avoid having to make withdrawals, claim them as income, and pay taxes on that income.
Understanding how and when to transfer an RRSP can not only help you save time but also help you avoid penalties.
What is an RRSP transfer?
An RRSP transfer involves moving assets directly from one registered retirement plan into another, whether at the same institution or at a different one.
However, if you withdraw your RRSP funds from one institution and deposit them in a new account at another, that will not count as a transfer — it’s considered a withdrawal. The withdrawal will then be subject to a withholding tax, which may be up to 30% of the amount withdrawn.
How RRSP transfers work
RRSPs are transferred via direct request to your financial institution. Typically, you’ll open a new account with your new investment provider, and that provider will then make the transfer request to the previous provider.
Can RRSP funds be transferred to spouses?
No. RRSP funds generally cannot be transferred to another person, even your spouse. You’re also not allowed to transfer your personal RRSP directly to a spousal RRSP.
However, in specific circumstances, such as a separation, marriage breakdown or the death of the holder, an RRSP holder’s assets may be transferred to the RRSP of their spouse or common-law partner if they are the named beneficiary. Be sure you understand any relevant provincial or territorial rules, as these can vary.
Are there tax penalties for transferring an RRSP to a TFSA?
Yes. If you move funds from your RRSP to a tax-free savings account (TFSA), you must first take out money from your RRSP. That withdrawal will trigger withholding tax, which you’ll need to pay. Only then can you contribute the remaining cash to your TFSA.
This type of transfer may only make sense if your income is in the lowest tax bracket or you have no other option to access the funds you need.
Types of RRSP transfers
When you initiate an RRSP transfer, your financial institution will ask whether you’re transferring your assets in-kind or in-cash.
In-kind transfer: If you choose a straightforward transfer of your RRSP investments from one institution to another without selling any stocks or ETFs, it’s called an in-kind transfer.
Cash transfer: If the investments held in your RRSP are liquidated before being transferred, the process is called a cash transfer. In this case, the funds will arrive at the new institution in the form of cash, which you can then reinvest.
Both in-kind and in-cash transfers are carried out without tax penalties as long as your financial institution moves funds from one RRSP account to another.
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How to transfer your RRSP to another financial institution
1. Open a new RRSP account
Both the new and old RRSP accounts must be active to initiate the transfer. You’ll usually need to provide details such as:
Your name, address and Social Insurance Number.
The existing RRSP plan number and name.
Name and address of the RRSP issuer.
The amount you’re transferring.
Whether you’d like to transfer the assets in cash or in kind.
A copy of your most recent account statement.
The RRSP plan number and name you’re transferring to.
The name and address of the institution you’re transferring to.
2. Fill out the proper forms
To transfer money directly from one RRSP account to another without incurring tax penalties, you may need to fill a T2033 form on the Canada Revenue Agency’s website.
However, in many cases, the financial institution receiving the transfer will ask you to complete its own version of the transfer authorization form instead. Some institutions also allow you to initiate RRSP transfers online.
The RRSP transfer form provides instructions to both the institution that currently holds your plan and the receiving institution.
3. Wait for RRSP funds to move
The RRSP transfer can take anywhere from a few days to six weeks to complete, depending on the financial institution and type of transfer.
Common reasons to transfer an RRSP
For consolidation or better investment options
People choose to change financial institutions for a variety of reasons, such as better customer service, to take advantage of lower bank fees, or to simplify their finances.
Robo advisors or discount brokerage services may offer customers additional incentives to transfer an RRSP.
Note that the institution you’re leaving may charge an RRSP transfer fee. Always check if the new institution will cover these fees.
Your life situation has changed
In the case of separation or divorce, one partner can transfer money from the RRSP on a tax-deferred basis, provided they have a written separation agreement or court order stating the division of property.
In the event of an RRSP holder’s death, if they are a parent or grandparent of a child with a registered disability savings plan (RDSP), their RRSP can be transferred to the child’s RDSP. This is known as an RRSP rollover.
If the spouse or common-law partner is stated as the beneficiary, the RRSP holder’s assets can also be transferred directly to the partner’s RRSP after death.
To keep up with Canada Revenue Agency rules
In the year you turn 71, your RRSP must be withdrawn as a lump sum payment, or converted to a registered retirement income fund (RRIF) or annuity.
If you transfer your RRSP directly to a RRIF by filling out a RRIF application form with your financial institution, you won’t pay tax on the transferred amount. Similarly, if you use your RRSP funds to purchase an annuity, you won’t pay tax on the transaction.
However, once you start receiving payments from your RRIF or annuity, you must claim them as income on your tax return.
According to the CRA, you can generally transfer some investment products (like GICs) held in an RRSP to a First Home Savings Account without immediate tax penalties. Such a transfer should not exceed the maximum FHSA participation room that’s available to you.
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