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RRSP Terminology

Fewer acronyms. More understanding.

Saving for your retirement is one of the most critical aspects of your overall financial plan. Yet it’s an area rife with terminology most of us don’t really understand or use on a daily basis. Use this glossary as a quick reference when you encounter a term you’re unfamiliar with.

Annuitant

Generally, an annuitant is the person for whom a retirement plan provides retirement income. In certain circumstances, the surviving spouse or common-law partner may qualify as the annuitant when, because of the death of the annuitant, he or she becomes entitled to receive benefits out of the retirement plan.

Common-law partner

This applies to your partner in a relationship, and at least one of the following conditions must apply. He or she:

  • Is the natural or adoptive parent (legal or in fact) of your child
  • Has been living and having a relationship with you for at least 12 continuous months
  • Lived with you previously for at least 12 continuous months as your spouse or common-law partner

Commutation payment

A fixed or single lump-sum payment from your RRSP annuity that is equal to the current value of all or part of your future annuity payments from the plan.

Deferred profit sharing plan (DPSP)

An employer-sponsored plan where the employer shares the profits of a business with all the employees or a designated group of employees.

Defined benefit provisions

Terms of a registered pension plan that promise a specified level of pension when you retire for each year of your pensionable service.

Financially dependent

You are generally considered a financially dependent child or grandchild of a deceased annuitant at the time of death if, before that person's death, you lived with and depended on the annuitant, and you meet one of the following conditions:

  • Your net income for the previous year (line 236 of your return) was less than the basic personal amount (line 300) for that previous year; or
  • For 2003 and later years, you are infirm and your net income for the previous year (line 236 of your return) was equal to or less than $13,814 (indexed annually after 2003).

If, before the annuitant's death, you lived away from home because you were attending school, you are still considered to have resided with the annuitant.

If your income was more than the amounts described above, you are not considered to be financially dependent on the annuitant at the time of death, unless you can establish that you were. You or your legal representative would have to submit a written request to your tax services office outlining the reasons why you should be considered as financially dependent on the annuitant at the time of death.

Foreign plan

A plan or arrangement maintained primarily to benefit non-residents for services they perform outside Canada.

Gift

Any amount that someone other than you or your spouse or common-law partner contributed to your RRSP.

Government-sponsored retirement arrangement

An unregistered retirement plan established for people who are not employees of a government or other public body, but who are paid from public funds for their services.

Locked-in RRSPs

In most cases, you will not be able to withdraw funds from a locked-in RRSP. Locked-in refers to the restrictions and limitations that are imposed by the Pension Benefit Act for each province and territory. The locked-in RRSP is designed to preserve pension assets for your retirement. Money put into your locked-in RRSP usually is the transfer value of pension benefits you have built up in your former employer's pension plan, which you asked to be moved when you terminated employment or plan membership. If you are unsure if your RRSPs are locked in, contact the issuer.

Money purchase provisions

Terms of a Registered Pension Plan (RPP) under which the amount of your pension depends on how much you and your employer contribute to the RPP.

Pension Adjustment (PA)

Your Pension Adjustment for a year is the total pension credits accrued for the year under your Registered Pension Plan defined benefit or money purchase provisions and any Deferred Profit Sharing Programs (DPSP) sponsored by your employer. A “pension credit” is a measure of the value of the benefit you earn for the year under a DPSP, or under a defined benefit or money purchase provision of a Registered Pension Plan. If you participate in a government-sponsored retirement arrangement or a specified retirement arrangement, your pension credit amount may also measure the value of the benefit you earn for the year under these arrangements. If you want to know how your Pension Adjustment is calculated or why you have one, it’s best to contact your employer or plan administrator.

Qualified beneficiary

A qualified beneficiary includes the deceased annuitant's spouse or common-law partner. It may also include a financially dependent child or grandchild of the deceased annuitant.

Qualifying home

For the purposes of the Home Buyers' Plan, a qualifying home is a housing unit located in Canada. This includes existing homes and those being constructed. Single-family homes, semi-detached homes, townhouses, mobile homes, condominium units, and apartments in duplexes, triplexes, fourplexes, or apartment buildings all qualify. A share in a co-operative housing corporation that entitles you to possess and gives you an equity interest in also qualifies. However, a share that only provides you with a right to tenancy in the housing unit does not qualify.

Refund of premiums

The amount that is paid or considered to have been paid from a deceased annuitant's RRSP to a qualified beneficiary.

Registered Pension Plan (RPP)

A registered pension plan where funds are set aside by an employer, or by an employer and employees, to provide a pension to employees when they retire.

Registered Retirement Income Fund (RRIF)

A RRIF is a fund you establish with a carrier and that BlueShore Financial registers. You transfer property to the carrier from an RRSP, RPP, or from another RRIF, and the carrier makes payments to you.

Registered Retirement Savings Plan (RRSP)

An RRSP is a retirement plan that BlueShore Financial registers and that you or your spouse or common-law partner establish and contribute to. Deductible RRSP contributions can be used to reduce your tax. Any income you earn in the RRSP is usually exempt from tax for the time the funds remain in the plan; however, you generally have to pay tax when you cash in or receive payments from the plan.

RRSP contribution

The amount you pay, in cash or in kind, at the time you contribute to an RRSP.

RRSP deduction

The amount you indicate on line 208 when you file your tax return.

RRSP deduction limit

The maximum amount you can deduct from contributions you made to your RRSPs or to a spousal or common-law partner RRSP for a year. The calculation is based, in part, on your previous year earned income (excluding transfers to your RRSPs of certain types of qualifying income). Pension adjustments (PAs), past service pension adjustments (PSPAs), pension adjustment reversals (PARs), and your unused RRSP deduction room, are also used to calculate the limit.

RRSP over-contributions

The amount of RRSP contributions that is more than your RRSP deduction limit for the year plus $2,000. Over-contributions may be subject to a tax of 1% per month.

RRSP unused contributions

The amount of RRSP contributions that you could not deduct or have chosen not to deduct. You can carry forward this amount and use it as a deduction in a future year up to your RRSP deduction limit for that year.

Specified retirement arrangement

A pension plan that is not registered for income tax purposes and is either not funded or only partly funded.

Spousal or common-law partner RRSP

A spousal or common-law partner RRSP is:

  • An RRSP to which the annuitant's spouse or common-law partner contributes
  • An RRSP that receives payments or transfers of property from RRSPs to which the annuitant's spouse or common-law partner has contributed
  • An RRSP that receives payments or transfers of property from RRIFs to which the annuitant has transferred amounts from other spousal or common-law partner RRSPs

Spouse

The person to whom you are legally married.