Federal Finance Minister Joe Oliver tabled the 2015 federal budget on April 21, 2015. This commentary summarizes the changes in the new budget that affect retirement income and savings. Budget changes that do not relate to retirement income and savings have been covered extensively by many accounting and tax advisory firms and will not be covered in this commentary.

Main Change – Minimum Withdrawal Factors for Registered Retirement Income Funds (RRIFs)

The main retirement-related change introduced in Budget 2015 is to adjust the RRIF minimum withdrawal factors that apply in respect of ages 71 to 94, as follows:

Age (at start of year) Existing Factor New Factor
% %
71 7.38 5.28
72 7.48 5.40
73 7.59 5.53
74 7.71 5.67
75 7.85 5.82
76 7.99 5.98
77 8.15 6.17
78 8.33 6.36
79 8.53 6.58
80 8.75 6.82
81 8.99 7.08
82 9.27 7.38
83 9.58 7.71
84 9.93 8.08
85 10.33 8.51
86 10.79 8.99
87 11.33 9.55
88 11.96 10.21
89 12.71 10.99
90 13.62 11.92
91 14.73 13.06
92 16.12 14.49
93 17.92 16.34
94 20.00 18.79
95 & over 20.00 20.00

 

The existing factors were determined on the basis of providing a regular stream of payments from age 71 to 100 assuming a 7% per annum nominal rate of return and indexing at 1% annually with factors capped at 20% for ages 94 and over. The new factors were determined assuming a 5% per annum nominal rate of return and indexing at 2% annually with factors capped at 20% for ages 95 and over.

Minimum withdrawal factors for ages 70 and under remain unchanged and continue to be determined by the formula 1 / (90 – age). Note that at the time of establishing the RRIF, individuals also have the option to base the minimum withdrawal amounts on the age of their spouse or common-law partner.

Similar rules will apply to those receiving annual payments from a defined contribution registered pension plan (RPP) or a Pooled Registered Pension Plan (PRPP).  These new factors will also apply to minimum payments from an Individual Pension Plan (IPP) after age 71 for members who are controlling shareholders or related persons.

The new RRIF rules have not been formally.  Stay tuned.  We will update you.