Registered Retirement Savings Plans, or RRSPs, offer Canadians a lot of benefits. The first is that the contributions you make reduce your taxable income for the year, which means more of your money can be invested and grow as you age. When it’s time to retire and you withdraw your funds, you will be taxed, but it’ll be at your (likely much lower) tax rate in retirement.
Considering there is no age minimum to open an RRSP, you might have an account for decades. At some point, you might also want to move that account from one financial institution to another. Here’s how — and why — to do that and how to avoid any major tax implications when you do.
What is an RRSP transfer?
An RRSP transfer lets you move money, investments, or both from one RRSP account to another. It’s often done directly between two financial institutions and can take anywhere from a few days to six weeks. You can swap institutions at any time, as long as you’re under 71 years of age at the end of the year in which you make the transfer.
Reasons to transfer an RRSP
Lower fees. Management fees can range widely between institutions, and while a few tenths of a percentage point might not sound like a lot, when it comes to investments, those fees can really add up over time.
Consolidation. It’s easy to end up with more than one RRSP in more than one place. Consolidating them all into a single RRSP (or at least into multiple RRSPs at a single institution) can make for much easier management.
Better investment options. Not every bank offers the same investment products, whether it’s access to specific funds or types of assets, like private credit or venture capital. People who feel restricted in their investment options are able to easily switch their account over to a provider that offers the products they're looking for.
Types of RRSP transfers
Whichever transfer method you choose, it’s important to have the transfer initiated by a financial institution. If you withdraw the money yourself to move to a new institution, the government considers that an RRSP withdrawal and you’ll be on the hook for the related taxes. Your bank may also charge a fee of $50-$200 in order to transfer your account, but sometimes the financial institution you transfer your account to will cover that charge.
Partial transfers vs. full transfers
RRSPs can contain many different types of assets, including cash, stocks and bonds. Just because you’re moving some of those assets around doesn’t mean the rest have to come along for the ride.
Partial transfers allow you to move certain assets in one RRSP account to another, while leaving others untouched. Full transfers move the entire balance from one RRSP account to another.
In-kind transfers vs. in-cash transfers
The term “in-kind” is just another way of saying “as-is.” An in-kind transfer swaps one institution for another without making changes to the contents of the account. It’s important to note that you can only complete an in-kind transfer to an institution that offers the investment options you currently own. The biggest advantage of an in-kind transfer is that you do not need to sell your securities to move them; they are just held by a different institution.
In-cash RRSP transfers first liquidate the assets in one account before moving the balance to a new account in the form of cash. This type of transfer is commonly used when changing investment strategies or taking advantage of investment options that weren’t offered by the institution that held the RRSP previously.
How to transfer your RRSP
Although the process varies based on the institutions you’re transferring from and to, here’s the gist:
Step 1 - Open the new RRSP account at the institution you want to move to.
You can’t transfer anything to an account that doesn’t exist.
Step 2 - Initiate the transfer.
This often happens through the institution receiving the new account, since they’re much more excited to get your money than the old institution is to give it away. You’ll also need the most recent statement from the RRSP you are transferring. Then you’ll need to designate the type of transfer (partial or full, in-kind or in-cash).
Step 3 - Wait.
Some transfers take a few days. Others take weeks — sometimes even more than a month. You’ll want to follow up in case of any delays.
