RRSPs vs RRIFs: What’s The Difference?

If you transfer your UK pension into Canada, you must move the funds into recognized financial vehicles approved by the QROPS process. Depending on the circumstances, that would be either a RRSP (Registered Retirement Savings Plan) or a RRIF (Registered Retirement Investment Fund.) Here is what you need to know about each one and which makes sense for you.

What is a RRSP?

A RRSP is designed to help Canadians save money for their retirement. They also allow Canadians to lower their taxable income by making RRSP contributions non-taxable at deposit. Canadians can contribute up to 18% of their previous year’s earnings, to a maximum of $27,830 (2021).

For example, if you made $60,000 last year, you would be able to deposit a maximum of $10,800 and your taxable income would be reduced to $49,200. However, if you made $160,000 you could only contribute the maximum amount ($27,830). Your taxable income would then be $132,170.

What is a RRIF?

A RRIF returns your retirement money back over to you in the form of regular withdrawals. You have the flexibility to decide how much you withdraw and how often (monthly, quarterly, yearly), allowing you to use your money as you please even if your circumstances change. However, you do have to take out a minimum amount each year. The withdrawal amount will increase as you get older.

At the time of your passing, your RRIF will transfer to your estate or any named beneficiaries.

When Do I Transfer an RRSP to a RRIF?

You must turn your RRSP into a RRIF in the year you turn 71 (you have until December 31 of that same year). You must do this even if you do not yet need the income that RRIFs provide.


Do I Transfer my UK Pension to a RRSP or a RRIF?

If you want to transfer your UK pension to Canada, currently you can only transfer the funds directly into an RRSP first. This can then be converted to a RRIF at any stage before the end of the year you turn 71.

RRSPs and RRIFs have a variety of rules around taxation (how much and when) and withdrawals. If you want to understand better how each financial vehicle works or how to transfer your UK pension over to Canada, we’re here to help. Contact us today.