2014-0563261E5 CONVERTING RRIF TO LIFE ANNUITY

Principal Issues: Whether a RRIF may be converted into a life annuity?

Position: Yes.

Reasons: Allowed under the legislation

Author: Tsang, Peky
Section: 60(l)(v);

XXXXXXXXXX

2014-056326
P. Tsang

January 6, 2015

Dear XXXXXXXXXX:

Re: Registered Retirement Income Fund (“RRIF”) Conversion to a Life Annuity

This letter is regarding your correspondence received in our office on December 23rd, 2014, wherein you inquired about converting your RRIF to a life annuity.

In general, information regarding your query may be found in Information Circular 78-18R6, Registered Retirement Income Funds, which is located on our website: http://www.cra-arc.gc.ca/E/pub/tp/ic78-18r6/ic78-18r6-e.html. In particular, paragraphs 50 and 51 are reproduced here for your reference:

50. A RRIF annuitant can use Form T2030, Direct Transfer Under Paragraph 60(l)(v), to request a direct transfer of a payment exceeding the minimum amount of the RRIF to a person licensed or otherwise authorized under the laws of Canada or a province to carry on an annuities business in Canada for the purchase of an annuity for the annuitant. You must report the minimum amount for the year and the transferred payment on a T4RIF slip. The issuer of the annuity should issue a receipt (see 39) showing the date and amount of the single payment used to purchase the annuity.

51. The annuity that is purchased can be for the life of the annuitant or for the lives jointly of the annuitant and the annuitant's spouse or common-law partner, with or without a guaranteed term. The guaranteed term cannot be more than 90 years minus:
(a) the annuitant's age at the time of purchase; or
(b) the age of the annuitant's spouse or common-law partner at the time of purchase.

The annuity can also be a fixed-term annuity with a term equal to 90 years minus:
(a) the annuitant's age at the time of purchase; or
(b) the age of the annuitant's spouse or common-law partner at the time of purchase.

The annuity has to begin making payments no later than a year after it is purchased. The annuity cannot provide for any payments except:
(a) annual or more frequent periodic payments that are equal to each other or unequal only because of adjustments described in subparagraphs 146(3)(b)(iii) to (v); and
(b) payments in full or partial commutation of the annuity and, when the commutation is partial, annual or more frequent periodic payments after the commutation that are equal to each other or unequal only because of adjustments described in subparagraphs 146(3)(b)(iii) to (v).

To summarize the above, where an amount, above the required minimum amount for the year, is transferred from an RRIF to purchase an annuity for the taxpayer who is the annuitant of the RRIF, the amount will be included in the taxpayer’s income and an offsetting deduction is available to the taxpayer.

If you have questions or would like to further discuss your query, please call the officer in charge of your file, Ms. Peky Tsang at (905) 721-5224. If we do not hear back from you by February 6th, 2015, we will be closing this file.

We trust our comments will be of assistance.

Yours truly,

Lita Krantz, CPA, CA
for Director
Deferred Income Plans Section II
Financial Industries and Trusts Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch

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