Registered Retirement Savings Plan

A Registered Retirement Savings Plan (RRSP), or equivalently simply Retirement Savings Plan (RSP), is a type of Canadian account for holding savings and investment assets. RRSPs have various tax advantages compared to investing outside of tax-preferred accounts. They were introduced in 1957 to promote savings for retirement by employees and self-employed people.

They must comply with a variety of restrictions stipulated in the Canadian Income Tax Act. Approved assets include savings accounts, guaranteed investment certificates (GICs), bonds, mortgage loans, mutual funds, income trusts, corporate shares, foreign currency and labour-sponsored funds. Rules determine the maximum contributions, the timing of contributions, the assets allowed, and the eventual conversion to a Registered Retirement Income Fund (RRIF) at age 71.

Contributions to RRSPs are deductible from total income, reducing income tax payable for the year in which the contributions are claimed. No income earned in the account is taxed (including interest, dividends, capital gains, foreign exchange gains, mortality credits, etc.). Most withdrawals are taxed as income when they are withdrawn. This is the same tax treatment provided to Registered Pension Plans established by employers.

Other countries provide similar treatment of tax-deferred accounts established by individual investors, i.e., contributions are considered to have been made with savings from before-tax income and tax is paid when amounts are withdrawn: Individual Retirement Accounts in the United States, and Self-invested personal pensions in the United Kingdom.

Net benefits are measured by the difference in outcomes between saving in a taxable account versus saving in an RRSP account. All official sites provide a list of benefits similar to the following:

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