Each month, income tax will be deducted from your pension payment.
Keep in mind...
In February of each year, CIBC Mellon, our pension payroll agent, will send your T4A tax slip to you. It will indicate the total pension paid to you and the tax deducted from your pension during the year. These slips are required for completing your income tax return and filing it with the Canada Revenue Agency.
You may choose to increase the amount deducted from your pension, especially if you receive income from other sources, such as investment and employment earnings. To make this adjustment, contact CIBC Mellon to request Personal Tax Credits Return forms. These forms detail the types of claims and deductions for which you may be eligible. Once you have completed them and sent them back to us, we can adjust the amount of tax we withhold from your pension.
What is income tax splitting?
Canadians who receive pension income that qualifies have the ability to allocate up to 50% of that income to their spouse or common-law partner. As a rule, pension income from the higher-earning spouse can be claimed by the lower-earning spouse to reduce the overall tax payable by the couple.
Who qualifies for income tax splitting?
Most Canadian pensioners who are married or living in a common-law relationship (as defined by the Canada Revenue Agency) qualify for pension income splitting. The individuals must not be living separate and apart, and must both be Canadian residents.
What type of income qualifies?
Depending on your age and the age of your spouse, certain types of income will qualify for pension income splitting. Pensioners aged 65 and older can split income from their registered pension plan (The CAAT Plan, for example) and from registered retirement savings plans, registered retirement income funds, and life income funds. Pensioners under 65 are generally limited to income from registered pension plans and certain qualifying death benefits.
Note that income from Old Age Security (OAS) and Canada Pension Plan (CPP) are not eligible to be split.
If I don't have a spouse, can I split my pension income with someone else?
No. Eligible pension income can only be split with a legal or common-law spouse.
How do I go about splitting my pension?
If you wish to split your pension from the CAAT Plan, you can do it each year when you file your income taxes. Both you and your spouse complete and sign the form, T1032 Joint Election to Split Pension Income, which should be included in your income tax package. You must both include a copy of the form with your returns each time you file.
Should I split my pension with my spouse?
The ultimate decision of whether or not to split your pension is up to you and your spouse, however you may wish to consult a financial advisor for more information. When making the decision, it's important to consider other tax calculations that may be affected by pension income splitting, such as medical credits and instalment payments. It will be important to remember that only one spouse can split his or her pension income with the other, so if both you and your spouse receive a pension, you have to decide which one will split the income with the other. Since your situation may change from year to year, it's a good idea to reassess the benefits of splitting your pension as part of your ongoing financial planning.
Who can I contact for more information?
Contact the Canada Revenue Agency directly for details about your income taxes and pension income splitting.