What is pension splitting?

Pension splitting technique reduces taxable income by allowing couples or common-law partners to transfer up to 50% of their pension to their partner who is in a lower income tax bracket resulting in lower taxes.

Pensions that are eligible for splitting are:

• Registered Retirement Pension Plan (RRSP)
• Registered Retirement Income Fund (RRIF)
• Pooled Registered Pension Plan (PRPP)
• Canada Pension Plan (CPP)
• Old Age Security (OAS)
• Non-registered plans

Pensioners are divided into three different categories:

• Taxpayers 65 or older as of December 31st of the tax year. Taxpayers who are 65 or older can claim pension credit on Line 31400 if they have received eligible pension income.
• Taxpayers under 65 as of December 31st and are receiving pensions due to the death of their spouse or common-law partners. This category of pensioners can claim pension credit due to the death of a spouse or partner even though they are under 65.
• Taxpayers under 65 as of December 31st and are receiving pensions NOT due to the death from their spouse or common-law partners.

Taxpayers who are under the age of 65 can claim pension credit on the following types of income:

• Life annuity payment from a superannuation or pension plan (including the Saskatchewan Pension Plan)
• Income received as a consequence of the death of your spouse or common-law partner
• Income received from certain foreign pension plans (including the taxable portion of the U.S. Social Security)
• Elected split pension income reported on your tax return that your spouse or common-law partner received from a life annuity payment from a superannuation or pension plan

Note: For 2014 and subsequent taxation years, if you live in the province of Quebec, you will only be able to split pension income for provincial tax purposes if you are 65 years of age or older.