For many Canadians, opening a Registered Retirement Savings Plan, or RRSP, is a key step on the road to creating a nest egg for the future.
If you are moving accounts to a different financial institution or want to consolidate disparate RRSPs with one provider, you’ll need to move these assets via the RRSP transfer process.
What is an RRSP transfer?
An RRSP transfer involves moving an asset out of one registered retirement plan into another, either at the same institution or with a different provider.
How RRSP transfers work
RRSP transfers are usually straightforward transactions. Assets can either be transferred in their existing form or can be liquidated and converted to cash first.
In specific circumstances, such as in the event of a separation, marriage breakdown or death , your RRSP assets may be transferred to another person’s account if they are the named beneficiary.
Reasons you might transfer an RRSP
Moving to a different financial institution
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.
In some cases, financial institutions, robo advisors or discount brokers may offer customers a bonus or an incentive to transfer their RRSP.
Generally, RRSP holders can transfer assets (either cash or investments) between RRSPs at different financial institutions, without incurring any tax penalties, as long as the financial institution makes the transfer directly and it doesn’t cause you to exceed your RRSP deduction limit.
The institution you’re leaving may charge an RRSP transfer fees, but in some cases, the institution you’re transferring to will cover these fees.
Transferring your RRSP ‘in kind’ or ‘in cash’
When you initiate an RRSP transfer, your financial institution will ask whether you’re transferring your assets ‘in kind’ or ‘in cash’. If you’re doing a straightforward transfer of your RRSP investments from one plan to another, without making any changes, this is called an ‘in kind’ transfer.
Your other option will be to transfer ‘in cash,’ which means your investments are sold before they are transferred. Both in-kind and in-cash transfers are carried out without tax penalties when your financial institution moves funds from one RRSP account to another.
Separation, divorce or death
For the most part, RRSPs can’t be transferred to other people, even to a spousal RRSP, without incurring tax penalties.
One exception is in the case of separation or divorce. In this situation, one partner can transfer money from the RRSP on a tax-deferred basis, as long as a written separation agreement or court order sets out a division of property.
Another exception is in the event of your death. For example, if you are a parent or grandparent of a child with a Registered Disability Savings Plan (RDSP), you can choose to have your RRSP transferred to their RDSP when you die. This is known as an RRSP rollover.
If your spouse or common-law partner is the beneficiary of your RRSP, your plan’s assets can also be transferred directly to their RRSP after death.
Moving to another registered account
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 to an annuity or a RRIF you can draw down income during your retirement years. These transfers involve filling out a RRIF application form with your financial institution.
It is also possible to indirectly transfer the funds from your RRSP to a Tax-Free Savings Account, or TFSA. However, you’ll have to withdraw the funds before depositing them into the TFSA. In this situation, the money you take out of your RRSP is considered income and will trigger a withholding tax. This type of transfer may only make sense in situations where your income is in the lowest tax bracket.
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 have to provide details such as:
- Your name, address, 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 statement of account.
- 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 need to fill a T2033 form, which is available on the Canada Revenue Agency’s website.
The financial institution receiving the transfer may also provide their own version of the transfer authorization form, which you can fill out instead of the CRA form. Some institutions also allow customers to initiate RRSP transfers online.
Whether paper-based or online, the RRSP transfer form will ultimately provide directions to both the institution that currently holds your plan and the receiving institution.
3. Wait for RRSP funds to move
It can take anywhere from a few days to six weeks to complete an RRSP transfer, depending on the financial institution.
Frequently asked questions about RRSP matching
Are there tax penalties for transferring an RRSP?
It depends. If you’re transferring from one RRSP to another RRSP at the same or a different financial institution, you won’t incur tax penalties. But, if you want to transfer funds from your RRSP to your TFSA, for example, you will have to withdraw the funds from your RRSP first, pay the required withholding tax, and then recontribute the assets to the TFSA.
Can I transfer my RRSP to my spouse?
No. RRSP funds can’t be transferred to another person, even your spouse. You also can’t transfer your personal RRSP to your spousal RRSP either.