RRSP transfers

Transfers between RRSPs

You can transfer cash and investments between RRSPs you hold at the same or different financial institutions. Tax will not be withheld if the transfer is made directly by the financial institution. One or both of the financial institutions involved may charge you a transfer fee.

Amounts you transfer directly to your RRSP do not affect your RRSP deduction limit.

You can’t transfer money from your RRSP to the RRSP of someone else. This applies to any spousal RRSPs that you may be contributing to.

Transferring investments from a non-registered account to an RRSP

You can transfer investments, such as stocks or bonds, from a non-registered account to your RRSP. This is called a transfer “in kind”. You might do this if you don’t have the cash to make your contribution, but you have investments that you want to use instead.

This has tax consequences, however. You are considered to have sold your investments at their fair market value and will have to report any resulting gain on your tax return. You can claim an RRSP deduction equal to the fair market value of the investments transferred to your RRSP. If the fair market value results in a loss, in order to claim the loss on your tax return, you must first sell the investments and then contribute the cash proceeds to your RRSP.

Transferring a retiring allowance to an RRSP or RPP

You can transfer part of a retiring allowance to your RRSP or registered pension plan (RPP). Retiring allowances are paid on or after retirement by an employer in recognition of long service. The Canada Revenue Agency (CRA) has a formula, based on years of service, for determining how much is eligible to be transferred. Tax will not be withheld if the transfer is made directly. The transfer will not affect your RRSP deduction limit.

Transfers between RRSPs and other registered plans

In certain situations, you can transfer funds from one registered plan to another without triggering tax consequences. For example:

• From an RESP to an RRSP – If your child has an RESP and doesn’t continue with their post-secondary education, you can get your contributions back. You may be able to transfer up to $50,000 of the earnings on your contributions tax free to your RRSP or your spouse’s. You must have unused RRSP contribution room to do so. Learn more about these transfers.
• From an RRSP to an RDSP – As of July 2011, if you are the parent or grandparent of a financially dependent infirm child or grandchild with an RDSP, you can arrange to have your RRSP transferred tax free to their RDSP when you die. Learn more about this type of transfer.

KEY POINT

You can transfer funds between your RRSPs without paying tax as long as the transfer is made directly by the financial institution.

Source: Get Smarter About Money.ca