Minimum withdrawal factors for registered retirement income funds

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.

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.

For 2015 and later years, Budget 2015 introduces a reduction to the minimum amount that must be withdrawn from a RRIF for a holder who is 71 to 94 years old. The reduction of the minimum amount that must be withdrawn will be achieved through adjustments to the RRIF minimum withdrawal factors.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

Individuals who have withdrawn more than the reduced 2015 minimum amount will be permitted to re‑contribute the excess (up to the amount of the reduction in the minimum withdrawal amount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

RRIF factors are also used to determine the minimum amount that must be withdrawn annually, starting at age 72, from a defined contribution RPP and a PRPP. For this reason, the change will also reduce the minimum amount that must be withdrawn from a RPP and a PRPP for 2015 and later years.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.

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.

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

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.

Yes. These changes apply to all types of RRIFs.

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

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.

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.