Many people consider an RRSP as equivalent to a bank account. While there are similarities, there are also significant differences, and understanding these is important in utilizing an RRSP to its best advantage.

A Registered Retirement Savings Plan (RRSP) is in fact a special trust defined by the Canadian Government that comes with certain rules and is recognized by Revenue Canada to convey certain tax benefits to its founder and beneficiary. RRSPs must be administered by a Trust Company, such as Canadian Western Trust. Each bank while the RRSP agent, works with a Trust Company to administer its client's RRSPs. Some important features of RRSPs are:

Your RRSP Eligibility is the maximum amount that you are allowed to contribute to your RRSP in the current taxation year. RRSP Eligibility now accumulates from year to year, if you do not use it. Employment income and certain other income but excluding investment income earn you more RRSP Eligibility, up to a maximum of $18,500 additional in 2007.

Your RRSP Contribution reduces your Taxable Income in the current year by the amount of the contribution, and through the reduction of taxable income reduces your Income Tax payable. Tax payers who are current with their Income Taxes then usually get a Tax refund. Regular RRSPs can only hold cash.

Earnings of your investments in your RRSP are Income Tax Exempt. This is a key benefit, after the tax reduction from the contribution, for holding investments in an RRSP. Mind you, Capital Losses from investments held in an RRSP also cannot be used to bring Income Tax reduction.

A Self Directed RRSP (SD RRSP) can also hold qualifying securities. This includes: Mutual Funds; publicly traded securities; bonds of public companies, and securities of certain private companies. In particular VCCs incorporated in British Columbia under the Small Business Venture Capital Act are RRSP eligible. Qualifying securities can be purchased by the SD RRSP, or they can be contributed to the SD RRSP instead of cash to gain Income Tax reduction.

An RRSP Redemption is the taking out of cash or securities from your RRSP. The amount of the redemption is added to your Taxable Income in the calendar year in which it is taken out.

At the age of 69 or before, each RRSP or SD RRSP holder must convert the trust to a Registered Income Fund (RIF). The rules of a RIF are that you must withdraw a minimum amount each year from the RIF, calculated as: (1/(90 - your current age))*(account balance). For example, if you were 70 and had $100,000 in a RIF, this would be (1/(90-70)*$100,000 = $100,000/20=$5,000. Each year a larger percentage must we redeemed, until at the age of 90 the RIF is depleted, thereby bringing all funds into income and subjecting all funds to Income Taxation.

Current RRSP Eligible Offerings

NetEquity Capital Partners is currently offering the following RRSP and RIF eligible products:

Documentation For Registered Retirement Savings Plan (RRSP) Transactions NetEquity Capital Partners is prepared to assist interested investors with the creation of RRSP accounts, the purchase of securities by SD RRSP holdings, or the contribution of securities to SD RRSPs. Similar but usually slightly different documentation is required by each Trustee. While NetEquity deals with many Trustees, a preferred Trustee is Olympia Trust in Calgary, Alberta.

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