A Prescribed Registered Retirement Income Fund (pRRIF) works a lot like a RRIF. It’s a way to turn the money you’ve saved in a pension plan or a Locked-In Retirement Account (LIRA) into retirement income.
The pRRIF has unique features, like spousal protection, that set it apart from regular RRSPs or RRIFs, offering additional benefits for your retirement planning.
The key difference is that pRRIFs are only available for pension funds regulated in Saskatchewan or Manitoba. They offer a flexible income option designed to support retirees in these provinces.
How does a pRRIF work?
When it’s time to start drawing a pension, you can convert the money in your pension plan or LIRA into a pRRIF, following the rules set by your province. If you’re transferring directly from a pension plan (e.g., Saskatchewan Pension Plan, Canada Pension Plan), the earliest age depends on the specific rules of that plan. If you’re transferring from a LIRA, you can do so as soon as you are eligible to start your pension.
By age 71, any funds remaining in your pension account or LIRA that haven’t been used to purchase an annuity must be transferred to a prescribed RRIF.
Minimum withdrawal requirements for a pRRIF
You’ll need to withdraw at least the minimum amount each year, but there’s no limit on how much you can take out beyond that. However, the Canada Revenue Agency requires you to start withdrawing a minimum amount starting the year after you set up the plan.
How often you receive payments—whether monthly, quarterly, or annually—is something you can decide with your financial institution. Keep in mind that any withdrawals over the minimum required amount will have income tax withheld. Also, all income from your pRRIF is considered taxable.
To figure out the minimum amount you need to withdraw each year from your prescribed RRIF, just take the value of your pRRIF on January 1 and multiply it by the rate that matches your age. This amount ranges from 2.5% at age 50 to 20% for age 95 and older.
With a prescribed RRIF, there’s no maximum amount on how much you can withdraw each year—you can even withdraw the entire balance in one lump sum if you choose. This is different from other provinces like Ontario and British Columbia, where locked-in funds that aren’t used to buy an annuity must be transferred to a Life Income Fund (LIF) at age 71, which has both minimum (federal) and maximum (provincial) withdrawal rules.
You can choose to base your minimum withdrawals on either your age or your spouse’s age. This is a one-time decision made when the prescribed RRIF is established, and using your spouse’s younger age can help reduce the minimum withdrawal amount.
pRRIF transfers
If your money is in a pension plan, you need to be eligible to start receiving a pension before you can transfer it to a prescribed RRIF (pRRIF). Keep in mind, not all pension plans are required to offer a direct transfer to a pRRIF.
If your money is in a LIRA, you’ll have the option to transfer it to a pRRIF once you’re eligible to begin your pension.
You can also transfer money from one pRRIF to another, but before the transfer happens, you’ll need to take out the minimum annual withdrawal required under the Income Tax Act (ITA). However, you can’t roll that withdrawal into an RRSP or a standard RRIF.
If you’ve been saving in a personal or group registered retirement savings plan (RRSP), you can transfer your account balance into a regular RRIF anytime.
How to set up a pRRIF
To set up a prescribed RRIF (pRRIF), you’ll work with your financial institution. They’ll guide you through the paperwork needed to transfer your money into the pRRIF.
Keep in mind that your spouse must sign a consent form to allow the transfer. This is because, under pension law, your spouse has the right to a survivor benefit of at least 60% of the monthly pension you were entitled to under your pension plan or could have received through an annuity. Without this consent, the transfer can’t happen.
Spousal protection through a pRRIF
A pRRIF works differently—it doesn’t offer a traditional survivor benefit. Instead, your spouse would receive the remaining balance in your pRRIF as of the date of your death. However, there’s no restriction on you withdrawing the entire amount from your pRRIF during your lifetime. If you do that, there wouldn’t be any balance left for your spouse to inherit.
Since a pRRIF includes spousal protection, you’re required to name your spouse as the beneficiary of the funds in your account.
If you don’t have a spouse, or if your spouse has waived their beneficiary status, the funds in your pRRIF will go to your designated beneficiary or become part of your estate.
Learn more with Oaken Financial
To learn more about Oaken RIFs, book an appointment for an in-person chat or call us at 1-855-OAKEN-22 (625-3622). You can even apply online today in as little as five minutes.