Yes, you can transfer your RRSP or TFSA and unlock your small LIRA

Yes you can transfer your RRSP or TFSAOK, maybe they don’t like you. Maybe you got audited and the Canada Revenue Agency found something fishy. Maybe someone who actually works at the CRA (a spurned lover, arch-nemesis from high school, etc) specifically has it in for you. But can you transfer your RRSP or TFSA without having to pay them a cut? Yeah, you can do that. They don’t really care.

Just so we’re totally clear: you can transfer your RRSP or TFSA without incurring tax consequences (in case of an RRSP) or losing your contribution limit (in case of a TFSA).

I get this question around transferring your RRSP, TFSA or small LIRA a lot. Like, really a lot. Clearly, a lot of Canadians care about this. And why wouldn’t they? No one likes to pay penalties and taxes. So I’m happy to share the good news!

To put it another way: if you had opened an RRSP with an institution that no longer suits your needs, you can leave without fear. The tax man is not coming after you to make you pay a penalty.

Need to transfer your registered account to a completely different financial institution such as WealthBar, or maybe a completely different investment product? Don’t want to incur taxes or penalties? You can use the CRA form, T2033 Direct Transfer Under Subsection 146.3(14.1), 147.5(21) or 146(21), or Paragraph 146(16)(a) or 146.3(2)(e).

Just try saying that 10 times fast. I dare you!

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Most companies have a simpler, more user friendly version of the form with their own logo. It uses (mostly) English descriptions of form fields. Most institutions call it an Interinstitutional Transfer of a Registered accounts. Unlike the CRA version, the branded version of financial institutions does include TFSA’s. Just fill it out and you can avoid paying a penalty.

The bottom line? You transfer your account without tax consequences and without affecting your contribution room or limit. I think that’s pretty cool.

A related question I get a lot: “can I unlock my pension if I leave an employer before I retire?”

AbsolutelyYes, you can unlock your pension if you leave an employer before you retire. The caveat? You can only do it to a certain maximum and only in certain provinces.

For most provinces, there is a rule of thumb. If the accrued value of your pension plan is transferred to a Locked-in Retirement Account, then it can be unlocked if the account meets certain conditions. The main condition is the size of the account.

This type of account behaves very similarly to an RRSP. However, you cannot take money out (even if you are willing to pay tax on it) or put more money in. Did you only work somewhere for a couple of years? Only have a small part of your pension vested? You will end up with an account that is somewhere between $1,000 and $10,000. 

It can be a big pain to deal with this account separately, especially if you are changing providers. But there is good news! Certain provincial jurisdictions allow you to unlock up to 20% of YMPE ($55,300 in 2017) and combine it with your RRSP. You do not need to keep a small account you have to separately manage for the rest of the days until you retire. (Even then, the LIF has a maximum withdrawal, so this tiny account issue will drag on and on.)

Looking to transfer your RRSP or TFSA?

Not sure if your accounts would qualify? We can help! Talk to your advisor. Ask questions. Don’t suffer with bad customer service, poor returns or high fees. This is one of those few times where the CRA is on your side and you can choose your provider without fear.

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