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Understanding Different Account Types

Learn about the various account types including Non-Registered, Non-Locked Registered, Locked-In Registered and Beneficiary Plan accounts

Varying account types offer different benefits to the account holders. It is important to understand the benefits each account type has to offer to Optimize a client's financial plan. This article gives a high-level overview of each account type we offer.

Non-Registered Accounts

Non-registered accounts are investment accounts that do not offer tax advantages, neither in the form of Tax-Free Growth or Tax-Free Contributions. These accounts do provide flexibility as there are no contribution limits.

Cash Account

  • What is it?: A regular, non-registered account where investments are held. There are no tax advantages, and you are subject to taxes on interest, dividends, or capital gains earned in majority of cases.

In Trust Fund (Minor) Account

  • What is it?: This type of account is typically set up by an adult (often a parent or grandparent) to hold investments for a minor. The assets are held in trust for the minor until they come of age (usually 18 or 19, depending on the province).
  • Further Insight: In Trust accounts can only be set up with one minor as the beneficiary. If a client would like to set up multiple In Trust Fund accounts with different beneficiaries, each beneficiary needs to have their own ITF account set up. 

Non-Locked Registered Accounts

Non-locked registered accounts are tax-advantaged accounts where contributions are subject to annual limits, but the funds grow tax-deferred or tax-free. These accounts are primarily used for retirement savings and income. RRSPs and TFSAs are the most common types in this category, offering tax deductions or tax-free growth. RRIFs provide a mechanism for converting savings into income during retirement, while spousal versions of RRSPs and RRIFs allow one spouse to contribute to the other’s retirement savings.

Registered Retirement Savings Plan (RRSP)

  • What is it?: An RRSP is a tax-advantaged account that helps the account holder save for retirement. Contributions are tax-deductible, and investments grow tax-deferred until withdrawal. RRSP withdrawals are taxed as income.
  • Further Insight: The annual contribution limit is 18% of your previous year's earned income, up to a limit of $32,490 for the 2025 tax year. 

Spousal Registered Retirement Savings Plan (RRSP)

  • What is it?: A spousal RRSP is an account where one spouse contributes to the other's retirement savings. Contributions are tax-deductible for the contributor, and investments grow tax-deferred until withdrawal. Spousal RRSP withdrawals are taxed as income.

Tax-Free Saving Account (TFSA)

  • What is it?: A TFSA account is a account where contributions are made with after-tax dollars. Investment growth and withdrawals are tax-free, making it a great tool for both short-term savings and long-term growth.
  • Further Insight: The annual TFSA contribution limit for 2025 is $7,000. The contribution limit does not change based on an individual’s earned income.

Retirement Income Fund (RIF)

  • What is it?: An account designed to provide retirement income from funds accumulated in an RRSP. Required minimum withdrawals are mandated each year, and the funds are taxed as income.

Spousal Retirement Income Fund (RIF)

  • What is it?: Similar to an RRIF but where one spouse owns the RIF, and the other spouse is the beneficiary. It allows for tax-deferral, and withdrawals are taxed as income.

Lock-In Registered Accounts

Lock-in registered accounts are specific types of pension accounts that restrict withdrawals until retirement age or certain conditions are met. These accounts are used to hold pension funds that are "locked in" by legislation. LIRAs, LRSPs, and RLSPs hold funds from employer pension plans, while LIFs and LRIFs are used to convert those locked-in funds into retirement income, with specific withdrawal restrictions. PRIFs offer similar features but with some additional flexibility in certain jurisdictions.

Lock-In Retirement Accounts (LIRA)

  • A Lock-In Retirement Account (LIRA) is a type of savings account that holds pension funds when you leave an employer's pension plan. This account "locks" the funds, meaning that you cannot access them until you reach retirement age, unless specific conditions are met. It is primarily used to preserve your pension funds from a former employer's plan until you're ready to retire.
  • Further Insight: The LIRA ensures that pension funds are preserved for retirement, preventing early withdrawals or spending. It allows the funds to continue growing tax-deferred until the account holder reaches the age where they can start drawing income, generally around age 55 to 65, depending on the province's regulations. The LIRA acts as a bridge between leaving a pension plan and transitioning to retirement income options.

Locked-In Retirement Savings Plan (LRSP)

  • What is it?: Similar to a LIRA, this is a type of locked-in account for pension funds from a pension plan, typically when an employee leaves an employer. It provides fewer withdrawal options than regular RRSPs. This account type was generally more common 
  • Further Insight: LIRA's are generally more common then LRSP's in present day.

Restricted Locked-In Savings Plan (RLSP)

  • What is it?: The Restricted Locked-In Savings Plan (RLSP) is a less common type of locked-in account that holds pension funds but with even stricter withdrawal restrictions. It’s typically used for certain pension plans in very specific situations, often when the plan is a small pension or has special regulatory conditions.
  • Further Insight: The RLSP is designed to keep pension funds intact and restricted for future retirement income. It offers less flexibility than a standard LIRA and has more stringent rules around accessing the funds. This ensures that the pension funds are preserved for retirement, especially in cases where pension legislation is more rigid. In some cases, it may apply to specific pension plans with unique terms or conditions.

Life Income Fund (LIF)

  • What is it?: A Life Income Fund (LIF) is a type of registered income fund that allows an individual to convert locked-in pension funds (typically from a LIRA) into income once they retire. LIFs have both a minimum and maximum withdrawal limit regulated by the province or territory. The goal is to provide retirement income while ensuring that the funds last over the individual's retirement years.
  • Further Insight: The LIF is designed to generate a steady stream of income from locked-in pension funds. The minimum withdrawal ensures that a certain portion of the funds is accessible each year, while the maximum withdrawal limit prevents the account holder from depleting the fund too quickly. 

Locked-In Retirement Income Fund (LRIF)

  • What is it?: Similar to a LIF, this is a retirement income fund for pension funds locked in by provincial pension regulations. It provides income while maintaining restrictions on withdrawals.
  • Further Insight: The key feature of LRIFs is that they also have withdrawal restrictions, but they often provide more flexibility than a LIF. For example, certain provinces allow individuals to draw more income from their LRIF, while still ensuring that the funds do not run out too quickly.

Retirement Life Income Fund (RLIF)

  • What is it?: Another form of locked-in income fund, mainly used to draw retirement income from locked-in pension funds. It has similar rules to a LIF but is often used in specific provinces.

Prescribed Registered Income Fund (PRIF)

  • What is it?: A less common type of locked-in income fund used to provide retirement income from a locked-in account. The withdrawal rules are similar to a LIF but have some flexibility depending on the jurisdiction.
  • Further Insight: PRIF's are generally only available for Saskatchewan or Manitoba regulated pension funds. 

Beneficiary Plan Accounts

Beneficiary plans are designed for specific purposes, such as education or supporting individuals with disabilities. RESPs are used to save for a child’s post-secondary education, with government grants and bonds available. RDSPs are aimed at individuals with disabilities, providing tax-deferred growth and government contributions to help with long-term needs of the beneficiary. 

Registered Education Savings Plan (RESP)

  • What is it?: A tax-advantaged savings plan designed to help save for a child’s post-secondary education. The savings within your RESP grow tax-free until withdrawal. In addition to growing savings tax-free, the Government of Canada offers grants in form of the Canada Education Savings Grants (CESG) and The Canada Learning Bond (CLB). 
  • Further Insight: We offer individual and family plan RESP's. Unlike an individual plan, which has only one beneficiary, a family plan lets you name more than one child as beneficiary. That way, if the primary beneficiary doesn’t pursue a post-secondary education, a sibling can take advantage of the funds.

Registered Disability Savings Plan (RDSP)

  • What is it?: A RDSP is a government-sponsored savings plan that helps individuals with disabilities save for their future. The government contributes grants and bonds, and funds grow tax-deferred until withdrawn by the beneficiary.
  • Further Insight: The Government of Canada provides Canada Disability Savings Grants (CDSG) and Canada Disability Savings Bonds (CDSB). The maximum grant (CDSG) is $3,500 each year, with a total liftetime maximum of $70,000. The maximum bond (CDSB) is $1,000 each year, with a lifetime limit of $20,000. No contributions have to be made to receive the bond.