The Process
Considerations When Transferring Your Pension
Key Steps in Pension Decision-Making
When considering a pension transfer, it’s important to acknowledge the benefits of stable income with the flexibility and control offered by a managed portfolio. For those with a pension from a previous employer, factors like age and beneficiary options can influence the choice. Thoughtful consideration of these elements ensures your decision supports your financial objectives.
Step 01.
Estimate Your Pension Value
Ask your HR department for an estimate of the commutable pension value.
Step 02.
Calculate RRSP Room
Assess your available RRSP contribution room to determine how much unused space you have.
Step 03.
Compare Options
Estimate the value of the income stream by leaving the pension intact versus transferring it.
Step 04.
Analyze the Tax Impact of a Transfer
Examine the immediate tax implications of transferring your pension to determine if it’s worth it.
Step 05.
Evaluate Extended Health Benefits
Discuss the value of the extended health benefits package offered for pensioners.
Step 06.
Understand Survivor Benefits
If you don’t have a spouse and do have children, the transfer may make more sense.
Factors to Consider
- Pensions generally must be transferred before age 55.
- The younger you are, the more the transfer makes sense.
- Pension income is subject to better income splitting rules.
- Pension income may be split with a spouse before age 65.
- RRIF income cannot be split until the RRIF owner is 65.
- Pension commuted value increases with lower interest rates.
- Taking the commuted value means losing perks like extended health benefits.
- Managing your pension means assuming longevity risk.
- A portion of the transfer is usually immediately taxable, but there are strategies to mitigate this tax
