What is a Variable
Benefit?
A Variable Benefit is a
retirement option paid directly from a defined contribution plan
which is similar in nature to the prescribed RRIF. It provides
retirees with flexibility in determining how much income is
withdrawn annually and how the money is invested. Investment
earnings continue to grow on a tax-sheltered basis.
How do I find out if my
pension plan offers a Variable Benefit?
Only a defined
contribution plan is permitted to offer a Variable Benefit. You
must contact the administrator of your pension plan to inquire if
your plan offers a Variable Benefit as a retirement option.
When can I start a
Variable Benefit?
You must be eligible to
commence your pension to transfer locked-in pension money to
establish a Variable Benefit Account. The earliest age at which
your pension can commence is established by the rules of your
plan.
If I previously
transferred assets out of my pension plan can I establish a
Variable Benefit Account?
Your previous plan may
permit you to transfer assets back into the pension plan in order
to establish a Variable Benefit Account. You must contact the
administrator of your previous pension plan to determine if the
rules of the plan permit the transfer.
Is it possible to transfer
only part of my locked-in assets to a Variable Benefit Account?
The rules of your plan
will determine if partial amounts can be transferred to a Variable
Benefit Account. Pension legislation requires your spouse to
provide the applicable consent
form and waiver form prior
to each transfer. You must contact the administrator of plan to
determine if partial transfers are allowed.
Can I start a Variable Benefit and
continue to work for my employer?
The rules of your plan will determine if you
are permitted to continue to work while receiving a Variable
Benefit from the plan. You must contact the administrator of
your pension plan to inquire if you can continue on in employment
after establishing a Variable Benefit Account.
Does my spouse have to
sign a consent form and a
waiver form for me to establish
a Variable Benefit Account?
Yes. Under pension
legislation, your spouse is entitled to receive a guaranteed
pension on your death paying 60% of the pension amount to which
you were entitled. A Variable Benefit cannot provide that
guarantee to your spouse. As well, there is nothing preventing
you from withdrawing the entire amount from your Variable Benefit
Account in which case your spouse would not receive any pension on
your death.
What is the minimum
withdrawal required to be made from a Variable Benefit Account?
A Variable Benefit
must comply with the Income Tax Act. The Income Tax Act
establishes the minimum annual withdrawal required to be made from
a Variable Benefit Account. The minimum withdrawal is a
percentage of your total account balance based on age at the
beginning of each year. There is no minimum withdrawal required
prior to age 72.
Can I use my spouse’s age
in determining the minimum withdrawal?
Yes. The Income Tax
Act permits you to use your age or the age of your spouse in
determining the minimum withdrawal. Using the age of
the younger person will reduce the minimum required withdrawal.
The rules of your pension plan will determine how often this
decision may be exercised.
What is the maximum
withdrawal from a Variable Benefit Account?
There is no maximum limit on withdrawals from
a Variable Benefit Account.
Do I receive my income monthly or in a lump
sum at the start of the year?
The
frequency of payments is a matter between you and the rules of
your pension plan.
Will I be taxed on the
withdrawals?
Withdrawals from a Variable Benefit Account
are considered to be pension payments and will be part of your
income for the year. You will have to pay
tax in accordance with the Income Tax Act.
What are the rules for
investing my Variable Benefit Account?
The investment rules are
those provided under your pension plan. You determine how the
money in your Variable Benefit Account is invested and investment
earnings continue to grow on a tax-sheltered basis to the extent
they are not withdrawn.
What happens when I die?
You must name your spouse
as beneficiary of the money in your Variable Benefit Account.
However, your spouse may waive his or her designated beneficiary
status by signing a waiver form and filing it with the
administrator of your plan before your death. Your spouse may
revoke the waiver at any time before your death by providing
notice in writing to the administrator of your plan. Form
2.02,
Spouse’s Waiver of Designated Beneficiary Status Under a
Variable Benefit Account, can be
found in Appendix A.
If you have no spouse or if your spouse has
signed a waiver, the money will pass to a designated beneficiary
or your estate. The disposition of the money is governed by the
Income Tax Act.
The Income Tax Regulations also allow
you to designate your spouse as a “specified beneficiary”. This
type of designation would permit the payments being made to you
from a Variable Benefit Account to continue to your spouse
uninterrupted upon your death. Your spouse would also have the
choice of transferring the assets out of the Variable Benefit
Account.
Can the assets in my Variable Benefit Account
be seized by my creditors?
No. The money in a Variable Benefit Account is
exempt from execution, seizure or attachment. Also, you may not
assign the money.
However, a Variable Benefit Account could be
subject to a division on spousal relationship breakdown pursuant
to The Family Property Act. As well, the money in a
Variable Benefit Account could be subject to attachment for
purposes of enforcing a maintenance order pursuant to The
Enforcement of Maintenance Orders Act.
Do I ever have to purchase a life annuity?
No. You do not have to purchase a life
annuity.
Can I transfer my money out of a Variable
Benefit Account?
Yes. You may transfer the balance in your
Variable Benefit Account to another plan, a Locked-In Retirement
Account (provided you are not past age 69), to a prescribed
Registered Retirement Income Fund or you may purchase a life
annuity.
Can I transfer assets to my Variable Benefit
Account from an ordinary RRSP or RRIF?
Your plan may permit you
to transfer assets that are not locked-in to your Variable Benefit
Account from an ordinary RRSP or RRIF. However, once
non-locked-in assets are transferred to a Variable Benefit Account
they are subject to the plan rules governing the Variable Benefit
and applicable legislation.
Can I roll my annual
withdrawal to an RRSP or RRIF?
No. The Variable Benefit
has certain characteristics such as protection of spouses that
make it different from an ordinary RRSP or RRIF.
