A Registered Retirement Savings Plan (RRSP), or 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.
Any income you earn in the RRSP is usually exempt from tax as long as the funds remain in the plan; you generally have to pay tax when you receive payments from the plan.
There are a number of RRSP types, but generally, they are set up by one or two associated people (usually individuals or spouses).
- An Individual RRSP it set up by a single person who is both the account holder and the contributor.
- A Spousal RRSP provides benefits for a single spouse and also a tax benefit for both spouses. A high-earner (spousal contributor) may contribute to a Spousal RRSP in their spouse’s name (the account holder). Since retirement income is divided evenly each spouse can benefit from a lower marginal tax rate.
- A Group RRSP is set up by an employer for employees and is funded with payroll deductions. It is administered by an investment manager and affords contributors the advantage of immediate tax savings.
- A Pooled RRSP, created in 2011, is an option created for small business employees and employers, as well as the self-employed.