What Protection Exists In Ontario For Your Retirement Savings

2015-10-28   minute read

Melanie Fuller

Lifestyle Debt

If you are having difficulty paying your debt in Ontario and are concerned that creditors may be able to seize your retirement fund or if you are considering withdrawing the fund to pay your debt, it is important to know what creditors can and cannot seize in Ontario.

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There are many different statutes that protect people from having their retirement funds seized. Some of these statutes are provincial and others are federal.

Federal legislation is legislation that is enforceable across Canada, while provincial legislation is legislation that is only enforceable in the province to which is applies.

Since provincial exemptions apply in the province where an asset is situated, it is important to contact someone in your province to make sure you have all the correct information. This post deals with exemptions specifically for Ontario, although some of the legislation discussed is federal as well.

Some of these statues apply generally and protect your assets outside of the context of a bankruptcy, while others only matter if you are filing a bankruptcy. RRSPs and RRIFs have both federal and provincial legislation that may protect them in Ontario.

The Bankruptcy and Insolvency Act, a federal statute, provides that RRSPs or RRIFs contributed to the plan more than 12 months ago are exempt from seizure when a person files a bankruptcy. This means that if you have an RRSP or RRIF, only the portion contributed during the last twelve months is seizable for your creditors if you file a bankruptcy. Since this exemption is set out in the Bankruptcy and Insolvency Act, it only provides protection when you are filing a bankruptcy, but not before.

However, if your RRSPs or RRIFs are held at an insurance company in Ontario, the Insurance Act further provides that such a contract held at an insurance company is exempt from seizure by your creditors if the designated beneficiary is a spouse, child, grandchild or parent of the person whose life is insured. This exemption applies in Ontario regardless of whether you are filing a bankruptcy or just having difficulty paying your debt.

The Insurance Act also specifies that if a beneficiary is designated and something should happen to you, those funds do not form part of your estate and cannot be seized by your creditors.

Pension Plans that are locked in such as LIRAs and LIFs enjoy a further exemption over the entire fund. This is provided for in the Pension Benefits Act, a provincial legislation that states this type of prescribed retirement savings arrangement is entirely exempt from execution or seizure. This type of fund is normally something that is contributed through your employer that you are not able to withdraw from. If you are unsure about whether your employment pension is locked in, contact your employer. This exemption applies regardless of whether or not you are filing a bankruptcy.

Needless to say, when you are experiencing financial difficulty, the importance of knowing your rights when it comes to your retirement fund is imperative before you make any decisions on what steps to take next.

Always contact a trusted professional to help guide you through the process before making any rash decision when it comes to your savings.

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