What is a Canadian QROPS RRIF?

Updated January 2023

When transferring a UK pension to Canada, the pension funds must be deposited into a registered account in Canada. This account can either be a Registered Retirement Savings Plan (RRSP) or a Registered Retirement Income Fund (RRIF).

The type of account that the money will be deposited into depends on the age and income needs of the client. If the client is age 71 or older, the funds must be deposited into a RRIF. If the client is under the age of 71, but is looking to start drawing from their pension on a regular basis (e.g. monthly withdrawals), they would definitely consider depositing their funds into a RRIF instead of a RRSP.

A Registered Retirement Income Fund (RRIF) is a type of savings plan that is available to Canadian residents for the purpose of providing income in retirement. RRIFs have certain tax advantages which allows the funds to grow on a tax deferred basis. Income tax is paid when money is withdrawn from the account as income.

The money in an RRIF can be invested in a variety of different vehicles, such as stocks, bonds, mutual funds, and GICs. This allows individuals to diversify their investments and manage their risk. Typically, RRIF accounts are invested on a more conservative basis compared to a RRSP because the owner of the RRIF is in an income phase so they do not want to see large fluctuations with their investment values.

Please note that due to some of the limitations with QROPS accounts (UK pension accounts that come to Canada), you are limited with the investment providers that you have access to once the funds arrive in Canada.

RRIF accounts also have a minimum amount that is required to be withdrawn from the account every year. To calculate the annual minimum withdrawal, the formula should be 1/(90-age) x RRIF market value and the result would be rounded to two decimals.

For example, if you have $250,000 in your RRIF account and are age 71, the minimum amount that has to be withdrawn (required by Canada Revenue Agency) is approximately $13,200.00.

In Summary, a RRIF is a type of investment account that is registered with the Canada Revenue Agency, offering tax advantages for retirement savings and is used as an income vehicle. Withdrawals are fully taxable as income in the year that they are received. Investment income (growth) is not taxed which allows the funds to grow while they are inside of a RRIF.

We are here to help every step of the way with providing professional advice on how your RRSP / RRIF accounts should be structured for your UK pension. Please contact us for more information.