Minimum withdrawal factors for registered retirement income funds

Notice to the reader

This measure has received Royal Assent.

1. What is a registered retirement income fund?

A registered retirement income fund (RRIF) is an arrangement between you and a carrier (an insurance company, a trust company, or a bank) that we register. You transfer property to the carrier from a registered retirement savings plan (RRSP), registered pension plan (RPP), pooled registered pension plan (PRPP), specified pension plan, or another RRIF, and the carrier makes payments to you.

The minimum amount must be paid to you in the year after the year the RRIF is established. Earnings in a RRIF are tax-free, and amounts paid out of a RRIF are taxable when you receive them. You can have more than one RRIF and you can have self-directed RRIFs.

2. What is the minimum amount that must be withdrawn annually from a RRIF?

To determine the required minimum withdrawal, we apply a percentage factor corresponding to the RRIF holder’s age at the beginning of the year to the value of the RRIF assets at the beginning of the year. When the RRIF is established, the holder also has the option to base the minimum withdrawals on the age of their spouse or common-law partner.

3. How is the budget changing the calculation of the minimum amount?

For 2015 and later years, Budget 2015 introduces a reduction to the minimum amount that must be withdrawn from a RRIF for a holder who is 71 to 94 years old. The reduction of the minimum amount that must be withdrawn will be achieved through adjustments to the RRIF minimum withdrawal factors.

For example, under the previous RRIF factors, a RRIF holder who was 71 years of age and had RRIF assets valued at $100,000 at the beginning of 2015 would have had to withdraw a minimum amount of $7,380 from his or her RRIF in 2015 (applying the previous factor of 7.38% to the RRIF assets). Under the new RRIF factors, the RRIF holder will have to withdraw a minimum amount of $5,280 (applying the new factor of 5.28% to the RRIF assets). The previous factors and the new factors are detailed below:

Age (at start of year)    

Previous factor    

New factor  

   
 

%

%

   

71

7.38

5.28

   

72

7.48

5.40

   

73

7.59

5.53

   

74

7.71

5.67

   

75

7.85

5.82

   

76

7.99

5.98

   

77

8.15

6.17

   

78

8.33

6.36

   

79

8.53

6.58

   

80

8.75

6.82

   

81

8.99

7.08

   

82

9.27

7.38

   

83

9.58

7.71

   

84

9.93

8.08

   

85

10.33

8.51

   

86

10.79

8.99

   

87

11.33

9.55

   

88

11.96

10.21

   

89

12.71

10.99

   

90

13.62

11.92

   

91

14.73

13.06

   

92

16.12

14.49

   

93

17.92

16.34

   

94

20

18.79

   

95 and over

20

20

   
4. What if I have withdrawn more than the new minimum amount for my age?

Individuals who have withdrawn more than the reduced 2015 minimum amount will be permitted to re‑contribute the excess (up to the amount of the reduction in the minimum withdrawal amount set out in Budget 2015) to their RRIFs.

Individuals can re-contribute amounts before March 1, 2016. The re-contribution will be deductible when calculating the holder’s income for the 2015 tax year.

5. Does the change affect RPPs and PRPPs since these plans also have rules for minimum withdrawals?

RRIF factors are also used to determine the minimum amount that must be withdrawn annually, starting at age 72, from a defined contribution RPP and a PRPP. For this reason, the change will also reduce the minimum amount that must be withdrawn from a RPP and a PRPP for 2015 and later years. Similar to the RRIF changes, re-contribution rules will apply to those receiving annual payments from a defined contribution RPP or a PRPP.

6. Did the Canada Revenue Agency (CRA) permit individuals to take advantage of these changes before they received Royal Assent?

Yes. Consistent with its general approach for proposed income tax changes, the CRA allowed financial institutions and individuals to act upon the changes before they received Royal Assent.

7. Will a re-contribution made in 2016 affect the minimum amount calculation for 2016?

No. The minimum amount for 2016 is based on the fair market value of the RRIF property at the beginning of 2016.

8. I received my 2015 minimum amount payment by way of a transfer of shares of a publicly-traded company. Can I make my re-contribution by transferring some shares back to my RRIF, even though the share price has changed?

If you choose to make an in-kind re-contribution, you have to use the fair market value of the property at the time of the re-contribution.

9. Do the changes apply to life income funds and other locked-in RRIFs?

Yes. These changes apply to all types of RRIFs.

10. Does the re-contribution have to be made to the same RRIF from which my minimum amount was paid to me?

No. You can re-contribute to any of your RRIFs.

11. Can I make the re-contribution to my RRSP instead?

Generally, the new RRIF factors reduce the minimum withdrawal amount for those RRIF holders aged 71 to 94. Given that such individuals are no longer permitted to contribute to an RRSP, in general, taxpayers will not be able to make re-contributions to their RRSPs.

12. Where can I get more information about these changes?

The CRA is committed to providing taxpayers with up-to-date information. The CRA encourages taxpayers to check its webpages often. All new forms, policies, and guidelines will be posted as they become available.

In the meantime, please consult the Department of Finance Canada’s Budget 2015 documents for details.

 

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