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RRSP Schemes: What You Need to Know to Avoid Being Scammed

  • 4 min read

Over the last several years, RRSP schemes have become more prevalent, and unsuspecting individuals are falling prey to these fraudulent investment campaigns. An RRSP scheme is a type of investment scheme that offers individuals the opportunity to withdraw funds either directly or indirectly from their Registered Retirement Savings Plan (RRSP) “tax-free”. These schemes often promise immediate access to locked-in assets, unrealistic returns, and income tax receipts that show a deduction of three or four times the amount contributed to an RRSP.

These problematic schemes are advertised professionally and published by reputable media sources, making them appear legitimate. Taxpayers usually come across these schemes on the internet, through local newspaper advertisements, or invitations to promotional meetings. To further portray legitimacy, promoters provide opinion letters from professionals that act as an endorsement, even though these letters are often unlawfully created.

Here are some examples of how RRSP schemes have worked in the past:

  • One type of RRSP scheme involves promoters convincing individuals to transfer their RRSP savings into a self-directed RRSP account. The promoter would then invest the funds in high-risk or non-existent investments, often overseas, and promise the individual a high rate of return. In many cases, the investments would fail or turn out to be fraudulent, and the promoter would disappear with the money.
  • Another type of RRSP scheme involves promoters convincing individuals to withdraw funds from their RRSPs “tax-free” by investing in a bogus offshore investment or setting up a loan-back arrangement. The promoter would promise the individual a portion of the investment back via offshore debit or credit cards, offshore bank accounts, or other means. In reality, these arrangements were often fraudulent, and the individual would end up losing their savings, paying taxes and penalties, and potentially facing legal repercussions.
  • Some RRSP schemes involved promoters using professional-looking websites, brochures, or seminars to convince individuals that they were investing in legitimate products, such as real estate or renewable energy projects. However, these investments were often fraudulent or non-existent, and the promoter would disappear with the money.

The Canada Revenue Agency (CRA) has publicly announced that the number of questionable RRSP schemes has increased in recent years. The CRA is warning the public that any participation in such schemes could result in a loss of long-term savings in combination with a tax audit and reassessment performed by the CRA. To date, the CRA has reassessed over 5,000 taxpayers who have been involved in an RRSP scheme, resulting in approximately $250 million in taxable income for the CRA.

The ramifications of participating in an RRSP scheme can be extremely dangerous to a taxpayer’s financial future. The arrangements that an individual may agree to when involved in an RRSP scheme can put their entire retirement savings at risk. In some cases, the scheme promoter has walked away with the entire value of the RRSP fund and cannot be found for legal or punitive action. Unfortunately, countless Canadians have lost their entire retirement savings to these dubious promoters after agreeing to participate in such schemes.

Furthermore, if a taxpayer withdraws funds from their RRSP, they will be taxed on the full amount withdrawn, regardless of whether the funds are lost as a result of an RRSP scheme. The CRA does not make exceptions to this rule, and interest and penalties can also be placed on the taxpayer.

To avoid falling victim to an RRSP scheme, it is essential to do your due diligence and contact the CRA directly if you have any uncertainty about the legitimacy of a scenario that allows for tax-free withdrawals. The details of the investment strategy or withdrawal plan in consideration can be discussed with the CRA, and they can fully explain any issues or penalties that may result from such action.

RRSP schemes should be avoided at all costs to protect your financial future. If you have already participated in such a scheme and are fearful of unlawful behavior, you can disclose it to the government under the voluntary disclosure program. If the disclosure is made before any compliance enforcement action is started, you may only have to pay the taxes owing plus interest. Remember to always be vigilant and seek professional advice before making any financial decisions that could impact your future.


Christopher - BSc, MBA

With over two decades of combined Big 5 Banking and Agency experience, Christopher launched Underbanked® to cut through the noise and complexity of financial information. Christopher has an MBA degree from McMaster University and BSc. from Western University in Canada.

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