MP Report by Jay Hill, M.P.
Minister Flaherty Sets the Facts Straight on RRIFs

This week, in response to urgent calls and correspondence from concerned constituents, I believe it important to share some vital yet very technical information on rules surrounding Registered Retirement Income Funds (RRIFs) and the direct action Minister Flaherty has taken on Canadians’ behalf.

Please don’t stop reading even if you’re not retired! Many queries have come from the children and other relatives of retired constituents. It’s all about a mistaken belief that, under rules for Registered Retirement Savings Plans (RRSPs) and RRIFs, retirees are forced to sell their assets at a time when stock values have plummeted.

Not so.

All Canadians must transfer their RRSPs to a RRIF at age 71. That’s part of the deal. Throughout your working life, you don’t have to pay income tax on the earnings you put into an RRSP to save for your retirement. In exchange, after 71, you must actually withdraw a minimum percentage of those savings each year through a RRIF to provide income in your retirement and pay tax on it at that time (although at a lower rate because income is typically lower in retirement than in your working years).

It’s a common misconception that seniors must sell their assets in order to satisfy RRIF requirements. In fact, income tax rules permit “in kind” transfers from RRSPs to RRIFs and to make withdrawals on your RRIFs.

In other words, you don’t have to sell your shares or mutual funds if you don’t want to! Nor do you pay tax on amounts transferred from your RRSP to a RRIF. Think about it in terms of an “on paper” transfer.

What’s important is that you must talk to your financial advisor or financial institution about how to complete this “in kind” transfer. And now we get to the root of the confusion.

So many MPs and Canadians were contacting Minister Flaherty about this issue that last week he wrote to Canada’s Financial Institutions and stressed that he expects all financial institutions to accommodate in-kind asset transfers between RRIFs and other accounts AT NO COST TO CLIENTS.

He gave a deadline of Friday, November 28th for the financial institutions to confirm that they are actually following this course of action and that their clients are being informed this option exists.

In the midst of this global economic turmoil, when so many Canadians have incurred significant financial challenges, there is no room for misinformation.

While we are certainly feeling the affects of this economic crisis, Canada is better positioned that most any other nation in the world. As the London Telegraph newspaper stated: “the Canadian Tories are a model of how to behave during a downturn….If the rest of the world had comported itself with similar modesty and prudence, we might not be in this mess.”

And so we shall continue. In his Economic and Fiscal Update later this week, Mr. Flaherty will outline how our government will continue to strengthen our top-ranked financial institutions sector, manage government spending, increase potential for Canada’s long-term growth, and continue to ”lead by example”.

For more information on RRIFs and other recent actions taken by Minister Flaherty, go to