What is an NRSP (Non-Registered Savings Plan)?
A Non-Registered Savings Plan (NRSP) is an account you can open to save and invest without the restrictions of a registered savings account.
An NRSP is not registered with the CRA.
Most times, the NRSP offers an alternative savings option for Canadians who have exceeded their contribution limits in registered accounts, such as the Registered Retirement Savings Plan (RRSP),Tax-Free Savings Account (TFSA), and Registered Education Savings Plan (RESP).
Some group retirement plan providers offer NRSPs that you can contribute to directly from payroll.
Contributing directly from payroll allows you to make automatic payments to the plan.
Non-Registered Savings Plans do not have tax advantages.
There are no tax deductions for your contributions to an NRSP, and your contributions do not grow tax-free.
Differences Between Registered and Non-Registered Savings Plans
The major differences between registered and non-registered savings accounts stem from the following.
Contribution Limits: Registered accounts generally have contribution limits that restrict how much Canadians can contribute and invest.
With a Non-Registered Savings Plan, you can contribute any amount, and there are no limits to how much you can deposit at any time.
Tax Implications: Registered savings accounts are tax-advantaged plans.
For example, contributions to an RRSP are tax-deductible.
You can claim tax deductions to reduce your taxes when you contribute to your RRSP.
When you save and invest in registered accounts, your money grows tax-free while in the account.
For the RRSP, you will pay taxes when you withdraw from the account.
TFSA withdrawals are tax-free.
With Non-Registered Savings Plans, your investment income is subject to tax while still in the account.
Withdrawals: Withdrawals from registered accounts can be taxed or tax-free, depending on the type of account.
When you withdraw from a TFSA, you are not required to pay tax.
On the other hand, withdrawals from an RRSP are taxed.
If your investment income in an NRSP is already taxed in the account, it will not be taxed again when you withdraw it.
However, you may be subject to tax on capital gains when you sell your investments in a Non-Registered Savings Plan to withdraw funds from the account.
Some financial institutions offer NRSP with withdrawal limits if the purpose of your savings is for retirement.
The set withdrawal limit ensures you have enough money saved and invested for retirement.
Flexibility: Through a Non-Registered Savings Plan, you have more flexibility to invest in a wider variety of investments.
There are no strict restrictions on allowable investment assets like registered accounts.
Also, with a Non-Registered Savings Plan, you can save for any financial goal.
Why Would I Contribute to an NRSP?
Generally, a Non-Registered Savings Plan allows you to invest your money when you do not have any contribution room left in your government-registered accounts.
Also, if you want more flexibility for your savings and investments, a NRSP would be more suitable.
You can keep your NRSP open for life, and you do not have to close it when you turn 71, as required for a registered retirement savings plan.
Frequently Asked Questions
- When is tax due on NRSP income?
Income earned from your NRSP is subject to tax yearly. You will need to report any income from your non-registered account when you file your tax return and pay your taxes before the due date. The tax filing due date is usually April 30 or the next working day if it falls on a weekend.
- Can I transfer from non-registered to TFSA?
Yes, you can transfer money from your Non-Registered Savings Plan to a tax-free savings account. There may be tax implications when you withdraw money from your NRSP to transfer to a TFSA.