Pension income splitting is a federal tax strategy that allows eligible Canadian couples to transfer up to 50 percent of qualifying pension income from the higher-earning spouse to the lower-earning spouse for tax purposes.
How Pension Income Splitting Works
Both spouses complete Form T1032 with their tax returns. The transfer is a paper election only — no money changes hands. Eligible income includes RRIF withdrawals for those aged 65 and older and life annuity payments from a registered pension plan. CPP and OAS are not eligible for this type of splitting.
Why It Matters in Retirement
For couples with unequal retirement income, this is one of the most valuable and underused strategies available. Tax savings can range from a few hundred to several thousand dollars per year depending on the income difference between spouses.
Related Resources
This article provides general financial education for Canadians. It is not personalized financial advice. For guidance specific to your situation, consider speaking with a CFP professional.