RSP Overview
A Retirement Savings Plan (RSP), once registered with the CRA (Canada Revenue Agency), allows the plan holder to invest on a tax deferred basis. Contributions made to the RSP are tax deductible (up to a limit) and any income or capital gain received inside the RSP would not be taxed until the money is withdrawn.
PLEASE NOTE THE FOLLOWING LIMITATIONS
IBC does not offer Locked-in plans or Registered Retirement Income Funds (RRIF). IBC does not accommodate any withdrawals under the Home Buyer's Plan and the Lifelong Learning Plan nor any investments in a home mortgage. IBC does not accommodate asset swaps or transfers in kind (cash or securities) from a cash or margin account at IBC or elsewhere to an IBC RRSP or TFSA account at this time.
A IB customer is limited to opening one regular/spousal RSP account.
Types of RSP
RSP accounts can be opened either as:
- Regular RSP – A customer can contribute cash and transfer qualified investments ("in kind") from another registered plan account. (IB only supports cash contributions and inbound ATON transfers of existing RSP to start).
- Spousal RSP – This is similar to a regular RSP except that the owner's spouse is allowed to contribute cash to the account as well. The contributing spouse will get the tax deduction for the tax year while the owner will get the benefit of withdrawing at a potentially lower tax rate when they retire.
Maturity of Plans
RSPs have a maturity no later than the end of the year in which the annuitant reaches 71 years of age. By the last day of the year in which the IB customer turns 71, funds must be withdrawn or transferred to an RIF or used to purchase an annuity.
Annual Contribution Limit
The contribution limit for a given tax year is typically displayed on the taxpayer’s notice of assessment produced by the CRA. The contribution limit under the assessment includes unused contribution room for the prior years. The following limits and deadlines apply annually.
Annual Contribution Deadline
Contributions can be made into the RSP account at any time during the calendar year or no later than 60 days after the end of the calendar year.
Over-contribution to the plan
Any contribution above the limit will be counted as excess contribution. There is a lifetime allowance of 2,000 CAD for over-contributions. Amounts of over-contribution beyond this limit are subject to a 1% penalty tax per month.
Withholding Taxes
A withdrawal of funds from an RSP constitute a de-registration of the plan and is subject to withholding tax. The tax will be withheld by IB at the time of the withdrawal. Gross amount of the RSP withdrawal will be included in the T4RSP slip, and will be counted towards the general income that one receives for the calendar year.
Special RSP Fees
Maintenance Fee
Customers with an RSP account will be responsible for a 12.50 CAD quarterly fee. This fee is charged to the account at the beginning of each calendar quarter. The fees will be prorated upon account creation.
For example, if a customer opens an RSP account on 2014-11-07, the fees will be:
2014-11-07 $7.50
2015-01-01 $12.50
2015-04-01 $12.50
Withdrawal (De-registration) Fee
50 CAD for each withdrawal.
Account Insurance
Segregated cash portion held with the trustee is insured up to $100,000 (principal and interest combined) by the Canadian Deposit Insurance Corporation (CDIC), which is a Federal government agency that insures Canadians’ savings against the failure of a bank or other CDIC member institution.
RSP accounts are also counted as a separate account for CIPF coverage, and so are eligible for an additional 1M CAD coverage under CIPF.
TFSA Overview
A Tax-Free Savings Account (TFSA) allows holders to set money aside tax-free throughout their lifetime. Each calendar year, customers can contribute up to the TFSA dollar limit for the year, plus any unused TFSA contribution room from the previous year, and the amount withdrawn the year before.
- Investments made inside a TFSA are not taxed.
- Withdrawals from a TFSA are not taxable.
- Contributions into a TFSA are not tax deductible.
- There's no upper age limit to maintain a TFSA account.
- A penalty of 1% per month will be assessed by the CRA on excess contribution.
Limitation
A IB customer is limited to opening one TFSA account.
Account Insurance
A TFSA account is considered part of a customer’s general account for purposes of CIPF coverage. Therefore, a TFSA will be combined with other (Non-RSP) IB accounts eligible for $1 million coverage.
Funding Overview (RSP and TFSA Accounts)
IB allows funding of a registered account (both RSP and TFSA) in cash or in kind.
IB offers the following funding choices:
- Fund a RSP/TFSA with cash.
- Transfer an RSP or TFSA account into IB using an ATON position transfer.
IB only allows funding of RSP and TFSA accounts in Canadian Dollars.
Beneficiary and Successor Holder Designation
The beneficiary or successor holder account designation is not applicable to customers who are residents of Quebec where such a designation can only be made by the deceased's last will and testament. For other provinces, beneficiaries could be either an individual or an entity. If beneficiary chosen is the estate of the account holder or a registered charity entity then only ONE entity beneficiary is allowed. If the applicant wants multiple beneficiaries, only individuals are allowed.
Successor Holder
A TFSA account holder can designate the spouse or common law partner as the successor holder of the account. This means that upon the death of the original holder, the spouse/common law partner becomes the new account holder. If the account holder chooses not to designate his or her spouse or common law partner as successor holder, then a beneficiary can be named.
