What Is a Non Registered Savings Plan (NRSP)?

By: Updated: December 6, 2021

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You may not be able to predict life's many curveballs, but you can preserve your peace of mind. After all, one of the biggest benefits of saving money for retirement (and for life) is a financial backstop against life's many uncertainties. 

The bad news? Choosing the best savings plans for the job can be kind of daunting. 

A non registered account offers Canadian savers a great way to take advantage of financial incentives for non registered investments. Here's what savers should know. 

 

What is a Non Registered Savings Plan (NRSP)?

A non registered savings plan (NRSP), often called a non registered account, is a type of investment account which is subject to tax when income is earned on investments held on the account. It is available solely to Canadian citizens. 

As the name implies, NRSP accounts are not registered with the Canadian government. However, these accounts are offered by major Canadian banks and financial institutions, such as the Royal Bank of Canada. There are two types of NRSP: cash accounts and margin accounts

 

What are the Benefits of an NRSP?

NRSP accounts offer several benefits to users but are often marketed on two features—ease and convenience. 

For example, unlike Registered Retired Savings Plans (RRSPs) or Tax-Free Savings Accounts (TFSAs), NRSPs don't have contribution limits. This allows you to save as much as you'd like without incurring a penalty, as you would in RRSPs or TFSAs. That's great news if you've already reached your contribution limits on RRSPs or TFSAs. 

Plus, unlike RRSPs, which have to mature into registered retirement income funds when you turn 71, NRSPs have no age limit. Anyone over 18 (or 19 in certain provinces) can open an NRSP, and you don't need to transition to a different plan upon turning 71. 

 

NRSP Contributions

As previously stated, RRSPs and TFSAs are subject to contribution limits. For example, TFSAs have a maximum contribution limit of $6,000 per year, though you can contribute a lot more if you haven't contributed in previous years. RRSP plans take a different approach, capping your maximum contribution at 18% of your annual income.

NRSP contributions are much more generous. They don't have any contribution limit. There is one downside, though: your contributions are impacted by tax. 

 

Can You Withdraw from an NRSP?

Another major benefit of an NRSP is consistent liquidity that you don't find in other tax-advantaged savings accounts. NRSPs don't have withdrawal limits. However, if you make a withdrawal and then place the money in a registered account, there are tax precautions to be wary of.  

 

Registered vs Non Registered Accounts

At this point, it's worth distinguishing between a registered and non registered account. 

As the name implies, the difference is whether or not the account is registered with the Canadian federal government. However, registered and non registered accounts come with different tax advantages (and tax consequences). These can be used in tandem to maximize tax benefits, but you have to be careful of tax consequences when moving money between them

 

What is the Difference Between an NRSP and a TFSA?

A tax-free savings account (TFSA) is a type of registered investment plan offered by the Canadian government. Like an NRSP, you can do more than just save—you can invest in things like stocks, bonds, mutual funds, guaranteed investment certificates, and more. 

There are two big differences between an NRSP and a TFSA. First, an NRSP is an unregistered account and a TFSA is registered. Second, unlike an NRSP, dividends and capital gains in a TFSA are not subject to tax

 

Does a non registered account sounds like the right financial decision for you? It's a great way for you to grow your money without some of the downsides attached to other tax-advantaged accounts. 

 

Are you incorporated in Canada?

Small business owners and incorporated individuals in Canada can use a Health Spending Account (HSA) to save up to 40% of their medical expenses.  An HSA has no premiums and it is a cost effective alternative to traditional health insurance.  The plan covers a wide variety of health and dental expenses.  An HSA takes only a few minutes to set up.  Learn more by downloading one of our guides.

 

Learn more about a Health Spending Account by downloading a free guide:

Download the HSA Guide for Incorporated Individuals Download the HSA Guide for a Business with Staff

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