WHEN DO I NEED A BENEFICIARY?
There are two occasions when you will be asked to name a beneficiary for your account:
- When you join SPP; and
- When you select the refund life annuity from SPP.
You may name either a person(s) or your estate as beneficiary. Your beneficiary can be changed at any time by notifying SPP in writing.
WHO CAN YOU PICK AS A BENEFICIARY?
There are several factors to consider when naming a beneficiary.
- If you name your spouse as a beneficiary, he/she can transfer it into their own SPP account, receive it as a direct payment, less withholding tax, or transfer to retirement savings at another financial institution.
- If you name someone other than your spouse or a disabled dependent child, the funds will be paid directly to him/her, less withholding tax.
- If you name more than one person as your beneficiary, it is important that you indicate what share of your account each beneficiary is to receive.
- When your estate is the beneficiary, the funds are paid to the estate, less withholding tax. It will then be used to settle debts of the estate, with the balance distributed according to the terms of your will.
- If you name minor children as beneficiaries, you should designate the appointed trustee as the beneficiary of your account in trust for your children.
ARE THERE WITHHOLDING TAXES FOR MY BENEFICIARY?
Withholding tax is determined using a schedule prescribed by the Canada Revenue Agency (CRA)
| Account Balance | Rate of Tax Withheld |
| $5,000 or less | 10% |
| $5,001 – $15,000 | 20% |
| $15,001 and over | 30% |
For example, if your account balance is $5,500 when you die and your beneficiary chooses to receive the payment directly, he or she will receive $4,400, and $1,100 of withholding tax will be sent to CRA. The beneficiary will receive a T4A to file with his or her income tax return and may be eligible for a refund of all or part of the tax paid.