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Specialized Glossaries:

Mortgage / Real Estate
Life Insurance
Estate Planning

Retirement / RSP / RIF
Mutual Funds
Credit / Financing

Abbreviations / Acronyms

Special Glossary of Retirement Terms

The purpose of a glossary is to provide brief definitions, while not necessarily legally accurate, are tailored to suit the meaning(s) given to the special terms you may come across in dealing with retirement matters. Additional meanings for the terms may be found in a dictionary.


An individual who purchases an annuity and will receive payments from that annuity.


A series of regular periodic payments comprising principal and interest. An annuity is a contract providing for a series of payments. In the case of retirement, an annuity is usually purchased from an insurance company who then pays the purchaser a monthly amount while still alive. Annuities may have more complicated features such as indexing, guarantee periods and benefits payable to a spouse or other beneficiary after death.

When an individual purchases an annuity, they usually pay a lump sum from their RRSP, or other source of funds, to an insurer. The insurer then takes this (premium) and divides by an annuity factor based on mortality, current interest rates and payment features.

Arm's Length:

A term used within a self-directed RRSP (mortgages) - Acting at arm's length contemplates a negotiation between parties with opposing interest, each of whom has only an economic interest in the outcome. Non-arm's length is one with a conflict of interest.


One who is to receive the benefits of any type of contract.


A disposition of personal property by will.

Best-Earnings Plan:

A defined-benefit plan that calculating a recipient's retirement benefit based on the best-earnings of the employee career, usually over a three or five year period.

Canada Pension Plan (CPP):

The Canada Pension Plan is a government program providing retirement, death and disability benefits for Canadians. Along with OAS, it makes up one leg of the retirement planning stool. Working individuals make contributions (2.7% of pay between $3,400 and $34,900 in 1995) which are matched by employers. In turn at retirement recipients receive a benefit of 25% of average monthly pensionable earnings adjusted for increases in the YMPE.

CPP contribution rates are scheduled to double over the next 20 years. There is uncertainty as to whether those employed will be willing to pay these high contribution rates. The future of CPP benefits may be in jeopardy.

Career-Average Plan:

A defined-benefit plan that bases a recipient's retirement benefit on the average earnings during an employee's career.


This term refers to the amount of Old Age Security (OAS) payments that are repaid through a special tax on high income pensions.

Compound Return: The increase in wealth that results from reinvestment, for example if $1,000 were invested in a savings account at 7% interest compounded annually, at the end of the year there would be $1,070. If the $70 interest were withdrawn from the account, there would be no compound return as there would be no reinvestment. If the $70 were left in the savings account along with the original $1,000 investment for another year, 7% interest would be earned on the $1,070 total. This would produce a final amount after two years of $1,144.90.

Deferred Annuity/RRIF:

An annuity or RRIF under which income payments to the annuitant commence some time after the date it is purchased.

A registered retirement income fund (RRIF) is an investment vehicle used to produce income in retirement. Generally RRIFs are established by transferring money from an RRSP into the RRIF.

Deferred Compensation:

Income paid at some future time, usually upon retirement or termination of employment.

Deferred Profit Sharing Plan:

A plan that allows an employer to set aside a portion of company profits for the benefit of employees. A corporation makes a contribution to the plan on behalf of an employee.

Defined Benefit Pension Plan:

A defined benefit pension plan is a pension plan, generally sponsored by an employer, that promises to pay a certain benefit at retirement. Most (DB) plans have a benefit based on a flat amount ($20 per year of service), on career earnings or on final earnings. These plans may be contributory or non-contributory.

Defined Contribution Plan:

A pension plan under which employer and employee contributions are fixed and the pension is based on these contributions.


Deferred Profit Sharing Plan. A plan which an employer may institute on behalf of employees to allow deferment of taxes on profit distribution to the employees.


All assets owned by an individual at the time of death. The estate includes all funds, personal effects, interest in business enterprises, titles to property, real estate and chattels, and evidence of ownership, such as stocks bonds and mortgages owned, and notes receivable.

Estate Planning:

The orderly arrangement of one's financial affairs to maximize the value transferred at death to the people and institutions favored by the deceased, with minimum loss of value because of taxes and forced liquidation of assets.

Executor: The person named in a will to manage the estate of the deceased according to the terms of the will.

Family Trust:

An inter vivos trust established with family members as beneficiaries:


An individual or institution occupying a position of trust. An executor, administrator or trustee, hence, "fiduciary" duties.

Fixed-Period Withdrawal Plan:

A plan though which the mutual fund investor's holdings are fully depleted through regular withdrawals over a set period of time. A specific amount of capital, together with accrued income, is systematically exhausted.

Fixed Term - Annuities:

Fixed Term Life Annuity: An annuity under which payments are guaranteed for the life of the annuitant.

A series of regular periodic payments comprising principal and interest. An annuity is a contract providing for a series of payments. In the case of retirement, an annuity is usually purchased from an insurance company who then pays the purchaser a monthly amount while still alive. Annuities may have more complicated features such as indexing, guarantee periods and benefits payable to a spouse or other beneficiary after death.

Guaranteed Income Supplement:

The amount payable to low income earners who are recipients of the OAS.

Guaranteed Term:

The length of time for which annuity payments are guaranteed. If the annuitant dies before the specified term, payments to the beneficiary will continue until the term ends. (Life Insurance)

Life Annuity:

An annuity under which payments are guaranteed for the life of the annuitant.

Life Annuity (With a Guaranteed Term):

An annuity with a special clause that guarantees payments will continue for a specified period, even if the annuitant dies before the end of the term.

Life Income Fund:

A RRIF that receive funds from a locked-in retirement account that provides a life income by restricting the maximum withdrawals from the plan based on the equivalent payments from an annuity.

Life Long Learning Plan: The LLP allows you to withdraw money from your RRSPs to pay for your own education or your spouse's or common-law partner's education. If certain conditions are net, you do not have to pay tax on the money when you withdraw it and you can pay back the money to your RRSPs over a 10 year period.

Living Will:

If you become incapacitated this document will preserves your wishes and act as your voice in medical decisions, if you are unable to speak for yourself as a result of medical reasons.

Locked In (or "locked-in"):

Locked-In is a term associated with funds in an RRSP or RRIF.

Funds are termed locked-in when they may only be used to produce retirement income. Locked-in funds generally arise when an individual transfers the commuted value of benefits earned under an employer sponsored pension plan to an RRSP or RRIF. In this situation, the benefits earned under the pension plan were for retirement, so the government forces the commuted value to be used for retirement benefits by locking them in. Even if you want to withdraw locked-in funds prior to retirement to purchase a home or cottage, buy a boat, pay for school etc. you cannot. The locked-in amounts may only be used for retirement income.

Past Service Contribution:

Contributions made to a pension plan to provide benefits conferred in recognition of service with the employer before the pension plan was installed.

PA-Pension Adjustment:

A pension adjustment is the deemed value, for tax purposes, of benefits accruing to members of a Registered Pension Plan (RPP) or Deferred Profit Sharing Plan (DPSP). The PA is used to reduce RRSP contribution room, as it is deemed to represent the value of the benefit that you are accruing under another tax deferral plan. In general the PA is calculated as 9 times the benefit accruing under an RPP or DPSP less $1,000.

As an example, say I earned $40,000 last year. This year I would be able to contribute $7,200 to my RRSP (40000*0.18). However, last year I was in my employers registered pension plan. Under the plan I accrue, or earn, a benefit of 1.5% of my salary. The value of the benefit I earn is therefore $600 for the year. The PA is $4,400 (9*600-1000). The PA reduces my available RRSP room, so instead of $7,200 of room I can only contribute up to $2,800.

The PA system is an attempt to equalize tax deferred savings programs in Canada so members of a company sponsored RPP don't have any advantage by accruing benefits in the plan and also being able to contribute the same amount to their RRSP as someone who is not in an RPP.

Pension Income Deduction:

The first $1,000 of pension income from certain sources is deductible from one's income for tax purposes. Applies to income from a pension or superannuation fund at any age, and where income is obtained from "private" sources, RRSP from age 65.

Pensionable Employment:

Any form of employment not exempt under the Canada Pension Plan that generates income subject to contributions to CCP.

Pooled RESP:

An RRSP in which the investment earnings on the funds contributed by a group of subscribers are allocated only to those beneficiaries who pursue a post-secondary education. Also referred to as an education trust, a scholarship trust or a group RESP.

Qualified Investments (RRSP/RRIF): Qualified investments is the term used for investments that can be held in an RRSP or RRIF. These investments generally include: Canadian dollar savings accounts, guaranteed investment certificates, term deposits shares of Canadian and foreign companies listed on a prescribed stock exchange, shares of some over-the-counter U.S. and Canadian companies, shares of some small businesses certain types of bonds and money-market investments such as treasury bills, Canada Savings Bonds, Government of Canada bonds, provincial government bonds, Crown Corporation bonds, bonds issued by Canadian corporations listed on a prescribed stock exchange, and certain strip bonds certain types of mortgages, including your own certain covered call options, warrants and rights mutual funds

Seniors Benefit:

OAS age and pension credits are to be replaced with the Seniors Benefit Program in the year 2001. If the change take affect then payments will be tax free and indexed to inflation. With certain income limits restrictions, conditions and exceptions.

Spousal RRSP:

An RRSP where one spouse makes the contributions and claims the tax deductions, but where title to the plan proceeds is in the name of the other spouse.

Tax-deferred annuity:

A tax-deferred annuity is a type of investment that guarantees payment of specific amounts of money at specific times, or a single lump sum payment. It also allows for the postponement (but not eliminate) taxes on earnings. You only pay tax when you receive money from the annuity.

Tax-Deferred savings:

An RRSP is an example of a tax-deferred savings plan (but don't eliminate). Unlike taxable savings, the taxes on the interest, dividends and capital gains of the tax-deferred savings are postponed until you cash them in or draw income from converting the RRSP into an RIF or other type of income withdrawal plan.

Term to 90 annuity:

An annuity that pays a fixed amount each year until it is exhausted in the year that the annuitant turns 90.

Unit Benefit Plan:

A type of defined benefit plan under which the pension earned each year is established by formula.

Unused RRSP- Carried Forward:

If a taxpayer has not contributed the maximum allowable RRSP contribution during a year the excess (carry forward room) amount can be carried forward for up to six years. This increases the maximum allowable RRSP contribution for future years.

Registered Annuity:

An annuity purchased from registered funds.

Registered Life Income Fund:

LIFs are also locked like RRIFs. They operate identically to a RRIF but must be converted to annuities by the end of the calendar year in which the individual turns 80. There is also legislation for maximum withdrawals from LIFs.

Registered Retirement Income Fund (RRIF):

A registered retirement income fund (RRIF) is an investment vehicle used to produce income in retirement. Generally RRIFs are established by transferring money from an RRSP into the RRIF. Payments must then commence from the RRIF at the latest in the year following the year the RRIF is established. RRIF withdrawals are subject to minimum amounts prescribed by Canada Customs and Revenue Agency (CCRA). You may withdraw amounts above the minimum amounts at any time. The RRIF continues as a tax sheltered vehicle and investment income accumulates tax free. All withdrawals are subject to income tax.

Minimum withdrawal amounts are based on age in whole numbers at the start of the year and the RRIF fund value at the start of the year.

The percentages for RRIFs established after 1992 for ages over 70 are prescribed by CCRA. For ages under 71 and RRIFs established prior to 1993 (for ages up to 78) the formula for the minimum withdrawal is 1 divided by 90 minus current age.

There are also locked in RRIFs or LIFs which operate identically to a RRIF but must be converted to annuities by the end of the calendar year in which the individual turns 80. There is also legislation for maximum withdrawals from LIFs.

Registered Retirement Savings Plan (RRSP:

RRSP - Registered Retirement Savings Plan. An RRSP is a deferred tax savings vehicle. Generally, you are allowed to put money into an RRSP and claim a deduction on your taxes in that year (or a future year) for your contribution. Contributions will accumulate with investment income tax free. When the money is taken out of the RRSP it is taxed as income. Money may be withdrawn at any point, but generally it is accumulated until retirement and an annuity or RRIF is purchased.

Retiring Allowance:

The amount money in a lump sum or in equal payments that is received by an employee upon retirement or upon the death of his or her spouse.

Reverse Mortgage:

Reverse mortgages allow individuals with significant equity in their homes to use it as a source of income. Individuals receive either a lump sum or a series of payments and use their residence as collateral. The principle and interest is repaid from the estate upon death or sale of the home. Reverse Mortgages are currently available to residents of British Columbia and Ontario. The amount of equity ranges from 15% to 45%.

Right of Survivorship:

The right to succeed to the ownership or part ownership of property as the result of the death of an owner or part owner.


The transfer of property from one person or situation to another without triggering tax at the time of transfer: e.g., from an RPP to an RRSP.


Registered Pension Plan. A government approved pension plan which allows both employee and employer to contribute to save for retirement.

RRSP -Ancillary Benefits:

Benefits offered by an employer's pension plan in addition to the regular payout. For example: inflation-indexing, bridging benefits that top up an early retiree's payments until Canada Pension Plan and Old Age Security kick in, and death benefits. These are "free" benefits in that they don't increase the pension adjustment or generate a past- service pension adjustment.

RSP -Carry-forward:

Starting 1991, if you don't make your full RRSP contribution each year, you can "bank" it for use in later years.

RSP -Contribution Room/Limit:

Your total tax-sheltered retirement savings limit for a given year has two parts: the pension adjustment and your RRSP. The pension adjustment (see below) puts a value on your employer sponsored plan, in any. The better the plan, the lower your personal RRSP limit, or RRSP contribution room.

RSP -Deduction Room/Limit:

Many advisors use this term instead of contribution room/limit to refer to pension and RRSP limits. They view contribution room/limit as the total of your deduction room/limit plus whatever is left of your deduction room/limit of your new lifetime penalty-free $8,000 overcontribution cushion. The Income Tax Act uses the term "deduction limit", but several government publications seem to use that and contribution limit interchangeably. You figure it out!.

RSP -Deferred Profit Sharing Plan (DPSP):

One form of tax-sheltered. Employer- sponsored savings plan. The employer must make at least a minimum contribution when there are profits to support it. You may generally make cash withdrawals when you quit or retire. How much you receive depends on how much the employer contributes and how well that money is invested.

RSP -Designated Plan:

A new category of defined-benefit registered pension plan. It applies when more than 50% of the plan's active members are "connected persons" or earn more than 2 and one half times the average industrial wage. A connected person is someone who owns at least 10% of any class of the company's shares or doesn't deal at arm's length with the employer. There are special rules to ensure these people don't give themselves overly generous tax-sheltered pension plans.

RSP - Offset:

The pension adjustment for a member of a defined-benefit registered pension plan is reduced by $1,000. This is to enable most members of "Cadillac" pension plans to contribute at least $1,000 to their RRSPs each year. Cadillac plans are top-of-the-line.

RSP -Overcontribution Cushion:

A penalty-free lifetime allowance of $8,000. The tally begins with overcontribution for 1991. This cushion was designed to provide leeway for mistakes and to accommodate past-service pension adjustments. To ensure parents don't improperly shelter money in their children's names, this cushion is available only to adults. Over contributions aren't tax deductible for the year they're made, but can be allocated to future years' RRSP limits, generating tax deductions then. Overcontributions beyond the cushion are taxed at 1% per month.

RSP Pension Adjustment (PA):

The deemed value of credits earned in an employer-sponsored plan. Your RRSP contribution room is reduced by this amount. Your employer must calculate the PA, and report it in the T4 tax slip issued in February.

RSP - Portability:

Refers to the ability to transfer the accumulated pension benefits of a plan member to another pension plan or to a locked-in RRSP when an employee retires or change jobs.

RSP -Registered Pension Plan (Defined Benefit):

Defined-benefit plans cover more people than any other form of RPP. The employer promises to fund a pension based on a set formula - for example: 1.5% of average salary for the final three years of service. Because these credits represent future income, not current contributions, their PA calculation can be complex.

RSP -Registered Pension Plan (Defined Contribution):

Also known as a money-purchase plan. The employer promises to contribute a set amount each year, but your pension amount isn't guaranteed, It will depend on how well the fund is invested and on interest rates at the time you retire.

RSP -Registered Pension Plan (Specified Multi-Employer Plan):

A SMEP is a special type of RPP for unionized employees. It requires a fixed employer contribution - like a defined contribution plan - but provides retirees with a defined-benefit pension. There are special PA calculation rules for SMEPS.

RSP - Spousal RRSP:

Provides a married person the opportunity of contributing to a spouse's RRSP, while claiming the deduction from his own income.

RSP -Vesting:

When credits vest, you become fully entitled to the future pension you've earned - or in the case of a defined-contribution plan, to the money contributed by your employer. That means you won't lose that money when you change jobs.

RSP -Yearly Maximum Pensionable Earnings (YMPE): An amount determined by the government based on the average industrial wage. For 1991, it's $30,500. This amount is used to set Canada Pension Plan contributions. Many defined-benefit plans also use it in calculating their benefit payouts. (See tax guide).

This Glossary of financial terms was created by Fiscal Agents Financial Information Services, Research Department. All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, mechanical, electronic, photocopying, recording, or otherwise, without the prior written permission of Fiscal Agents. Copyright Fiscal Agents © 2000. All Worldwide Rights Reserved. See Notes and Credits or see permissions page.

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