Last updated: December 15 2010

Attractive Changes to Saskatchewan Pension Plan (SPP)

On December 7th, the federal government and province of Saskatchewan announced proposed changes to the Saskatchewan Pension Plan. The annual limit for contributions will rise from $600 to $2500, subject to available RRSP contribution room. This is good news for those who wish to tap into more of a good news story for those looking for financial stability in retirement. Since its inception in 1986 the SPP has averaged a return of over 8% per year.

The SPP is a money purchase plan designed for those who have no access to an employee pension plan. The only requirement for joining the plan is that you are between 18 and 71 ñ and there are no residency requirements.

In the past, you did not need earned income to contribute to the SPP and this was of great benefit to unwaged citizens such as homemakers. Their contributions were not deductible but the rules allowed them to build retirement savings with after-tax dollars. The government implemented the Tax Free Savings Account that can now be used in these circumstances as TFSA contribution limits are not dependent upon earnings and are available to every Canadian resident age 18 and older.

Rollovers will be permitted to the RRSP or RDSP (Registered Disability Savings Plan) or a financially dependent child. Other rules regarding attribution and over-contributions that apply to RRSPs will also apply to SPP. For example, some or all withdrawals from spousal SPP accounts will be taxed to the contributing spouse when there have been spousal SPP contributions in the year of withdrawal or the two previous years. These attribution rules will apply to contributions made after 2010. As well, SPP contributions will be part of the annual RRSP contribution limit and therefore subject to over-contribution tax and penalties. The first $600 contributed for the 2010 tax year will be exempt from these rules

SPP annuity payments will be eligible for pension splitting and the pension amount as they will no longer be referred to as a prescribed provincial pension plan and instead will be a specified pension plan. This is significant as, unlike RRIFs, the SPP will be eligible for pension sharing at age 55. With no residency requirements, this may be an attractive addition to your retirement plan!

For further detail:

http://www.saskpension.com/

http://www.saskpension.com/administration/limitincrease.php

http://www.fin.gc.ca/n10/10-118-eng.asp
 
ADDITIONAL EDUCATION RESOURCES:  Tax Efficient Retirement Income Planning Course and EverGreen Explanitory Notes.