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Retirement Income Options
Glossary
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A
Annual Minimum Payment (AMP)
The federal government requires that holders of Retirement Income Funds (RIFs) withdraw a minimum amount of retirement income from their RIFs each year. The AMP is calculated as a percentage of the plan balance at the beginning of the year based on the planholder's year of birth. If the planholder has a spouse or common law partner, that individual's year of birth can be used instead.
Annuitant
Owner or planholder of a Retirement Income Fund (RIF).
Annuity
An investment providing periodic payments for a specified term or for life. An annuity can be purchased with registered or non-registered funds.
Attribution Rule
Attribution rule applies if contributions to the Spousal RSP (prior to converting to a RIF) were made in the year of withdrawal or in the two previous years of withdrawal. The withdrawn amount in excess of the Annual Minimum Payment (AMP) is attributed back to the contributor.
B
Beneficiary
The person named to receive all or part of the proceeds of a Retirement Income Fund (RIF) in the event of the death of the annuitant or planholder.
Blended Payment
A retirement payment consisting of both a portion of the annual minimum and an amount in excess of the minimum.
C
Canada Pension Plan (CPP)
The Canada Pension Plan is a "contributory" plan. This means that all costs are covered by the finanical contributions paid into the Plan by employees, their employers and self-employed people, and from interest earned on the investment of that money. The Canada Pension Plan is not funded through general tax revenues.
The Canada Pension Plan pays a monthly retirement pension to people who have worked and contributed to the CPP. The CPP also acts as an insurance plan, providing disability and survivor benefits for those who qualify. It provides a monthly income to you and your dependent children if you become severely disabled during your working years. It also provides a monthly income to your surviving spouse or common-law partner and dependent children if you die. A lump-sum death benefit is available to your estate when you die. For more information visit www.hrdc.gc.ca.
F
Federal Pension Tax Credit
The first $1,000 of pension income (including earnings from retirement income plans) is eligible for a 16% federal tax credit for annuitants aged 65 or older.
G
Guaranteed Income Supplement (GIS)
The Guaranteed Income Supplement provides additional money, on top of the Old Age Security pension, to low-income seniors living in Canada. To be eligible for the GIS benefit, you must be receving the Old Age Security pension and meet the income requirements set by the government.
L
Life Income Fund (LIF)
A retirement income fund that is established by the transfer of locked-in funds from a Registered Pension Plan (RPP), Locked-in Retirement Savings Plan (LRSP), Locked-in Retirement Account (LIRA) and in some cases a Locked-in Retirement Income Fund (LRIF).
Locked-in RSP (LRSP)
A retirement savings plan that is established by the transfer of locked-in funds from a Registered Pension Plan (RPP) or another locked-in retirement savings/income plan such as a Locked-in Retirement Savings Plan (LRSP), Locked-in Retirement Account (LIRA), Life Income Fund (LIF) or Locked-in Retirement Income Fund (LRIF).
Locked-in Retirement Account (LIRA)
A retirement savings plan that is established by the transfer of locked-in funds from a Registered Pension Plan (RPP) or another locked-in retirement savings/income plan such as a Locked-in Retirement Savings Plan (LRSP), Locked-in Retirement Account (LIRA), Life Income Fund (LIF) or Locked-in Retirement Income Fund (LRIF).
Locked-in Retirement Income Fund (LRIF)
See definition for LIF.
O
Old Age Security (OAS)
The Old Age Security pension is a monthly benefit available, if applied for, to most Canadians 65 years of age or over. Old Age Security residence requirements must also be met. An applicant's employment history is not a factor in determining eligibility, nor does the applicant need to be retired. Old Age Security pensioners pay federal and provincial income tax. Higher income pensioners also repay part or all of their benefits through the tax system.
P
Payment Base Year
Legislation allows minimum payments to be based on the birth year of the planholder or their spouse. This allows payments to be based on a younger age, thereby reducing payment amounts and increasing funds available for investment.
Pension Tax Credit
The first $1,000 of pension income qualifies for a federal tax credit (Pension Income Credit) for all planholders provided they are at least 65 years of age.
Prescribed Retirement Income Fund (PRIF)
PRIFs are identical to regular Retirement Income Funds (RIFs), with the following exceptions: a PRIF is creditor-protected, meaning creditors cannot access PRIF funds upon the customer's insolvency or bankruptcy, and, like Locked-in Retirement Income Funds (LRIFs), PRIF funds cannot be commingled with regular RIF funds or other locked-in funds.
Q
Quebec Pension Plan (QPP)
The QPP is the Quebec equivalent of the Canada Pension Plan (CPP). See Canada Pension Plan, above, for details.
R
Retirement Income Options
Retirement Income Options are options into which your retirement savings can convert. The options are a RIF, an annuity or cash.
Retirement Savings Plan (RSP)
A retirement savings plan (RSP) is an investment account designed primarily for saving towards your retirement years. Your annual RSP contribution can greatly reduce the amount of income tax you pay in that year and the money you put away can have years of tax-deferred growth potential. You pay tax only on the amounts you withdraw.
Retirement Income Fund (RIF)
A RIF is a natural continuation of an RSP, providing the same tax deferral of principal and earnings, with one key difference. Unlike an RSP which permits contributions, a RIF requires that a minimum amount, based on age, be withdrawn each year.
S
Spouse/Common-Law Partner
For the purpose of the Canada Pension Plan, a "spouse" is a person of the opposite sex with whom you are in a legal marriage. "Common-law partner" is defined as two people, regardless of sex, who have been living together in a conjugal relationship for a year or more.
Spousal Retirement Income Fund
A RIF registered in the name of the contributor's spouse.
Successor Annuitant
If a spouse is named as successor annuitant, the Retirement Income Fund (RIF) registration changes to the surviving spouse's name after the annuitant passes away, so that the RIF plan and payment amounts may continue to the spouse uninterrupted. Only a spouse can be named a successor annuitant.
T
T4 RIF
A T4 RIF is a tax slip issued annually and reflecting all Retirement Income Fund (RIF) income received in the previous calendar year. This income should be included as taxable income on the customer's tax return. The T4 RIF will also indicate any tax that was withheld at source.
W
Withholding Tax
Tax is automatically withheld on any amount withdrawn in excess of the minimum at the applicable tax rates (corresponding to RSP withholding tax rates). The current Canada Customs and Revenue Agency (CCRA) withholding tax rates are applied to any amount withdrawn from a Retirement Income Fund (RIF) that exceeds the annual minimum payment.
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