Minimum amount from a RRIF
As the carrier of a RRIF, you have to pay a minimum amount to the annuitant every year after the year in which the RRIF is set up. You calculate this amount by multiplying the fair market value (FMV) of the property held in the RRIF at the start of the year by a prescribed factor.
The costs associated with the redemption of units of a mutual fund are expenses of the RRIF. Therefore, such redemption fees are not part of the minimum amount.
The prescribed factor you use depends on the age of the RRIF annuitant, or the spouse or common-law partner's age if at the time the RRIF was being set up the annuitant elected to use the spouse or common-law partner's. It also depends on when the RRIF was set up. The prescribed factor is determined by regulations or calculated by dividing 1 by the result of 90 minus the age (in whole years) of the annuitant or the spouse or common-law partner at the beginning of the year.
Chart – Prescribed factors shows the prescribed factor you should use based on the age of the RRIF annuitant or the spouse or common-law partner.
RRIF that holds annuity contracts
A trusteed RRIF is permitted to hold the following two types of annuity contracts as qualified investments.
Locked-in annuity contracts
An annuity contract is one that a licensed annuities provider issues (this is a person licensed or otherwise authorized under the laws of Canada or a province or territory to carry on an annuities business in Canada) and that meets all the following conditions:
- The contract states that periodic payments be made annually or more frequently
- The RRIF trust is the only person entitled to receive the annuity payments under the contract (unless the trust disposes of the annuity)
- Usually, the time and the amount of any payment under the contract cannot vary and must be based on the life of the RRIF annuitant. However, if the annuitant has elected to have the minimum amount paid to the annuitant's spouse or common-law partner after the annuitant's death, the payments can be based on the joint lives of the annuitant and the spouse or common-law partner
- The periodic payments can start no later than the end of the year that follows the year in which the trust acquired the contract
- The annuity contract must be one of the following:
- A life annuity for the life of the RRIF annuitant that does not have a guaranteed period that runs past the end of the year in which the annuitant reaches 90 years of age. If the RRIF annuitant had a younger spouse or common-law partner when the contract was acquired, the annuity can be for the joint lives of the annuitant and the spouse or common-law partner with a guaranteed period that does not run past the end of the year in which the spouse or common-law partner reaches 90 years of age.
- A term annuity with a term equal to either 90 years minus the age of the RRIF annuitant at the time the periodic payments start, or 90 years minus the age of the annuitant's spouse or common-law partner on that date if the spouse or common-law partner is younger than the annuitant.
- The periodic payments must be equal, unless they have been adjusted for one of the following reasons:
- in accordance with indexing
- to reflect an increase or reduction in the value of a specified group of assets constituting the assets of a separate and distinct account or fund maintained for a variable annuities business by a licensed annuity provider
- in accordance with a change in the interest rate on which the annuity is based, only if the new rate equals or approximates a generally available Canadian market interest rate
- to reflect increases in the consumer price index, in whole or in part, as published by Statistics Canada under the authority of the Statistics Act
- to reflect an increase in the rate specified in the annuity contract of not more than 4% per year
- in accordance with an annual increase to the extent that the amount or rate of return that would have been earned on a pool of investment assets (available for purchase by the public and specified in the contract) is more than an amount or rate specified in the plan and provides that no other increase may be made in the amount payable
- as a result of a partial surrender of the right to receive periodic payments under the contract
Other annuity contracts
These are contracts issued by a licensed annuities provider that meet both the following conditions:
- The RRIF trust is the only person entitled to receive the annuity payments under the contract. This does not apply after the RRIF trust disposes of the annuity
- The annuity contract must give the annuitant an ongoing right to surrender the contract for an amount that, ignoring reasonable sales and administrative charges, approximates the amount that could be required to fund future periodic payments under the contract
Calculating the minimum amount
Calculate the minimum amount for trusteed RRIFs that hold locked-in annuity contracts as follows:
The existing rules for calculating the minimum amount as described at the start of this appendix will continue to apply to a trusteed RRIF as long as it does not acquire a locked-in annuity contract. The calculation for a trusteed RRIF that holds a locked-in annuity contract applies to any year that starts after 1997 and after the trust first holds a locked-in annuity contract. See Example – Calculating the minimum amount.
If a trusteed RRIF does not hold a locked-in annuity contract at the start of the year, the minimum amount is determined by multiplying the FMV of all the property held by the RRIF at the start of the year by the appropriate prescribed factor.
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