When is a pension not a pension?

The Problem:

Canada Revenue Agency tells me I was not eligible to split pension income with my wife in 2007 and 2008. Now I have a huge tax bill with a penalty. The income came from a registered retirement income fund and a locked-in retirement income fund. That money came from my defined-contribution pension plan when I left Sobeys in 2006. I am now 58 years old.

The Pain:

Only lifetime income paid directly from a pension plan qualifies for the federal pension credit and for splitting with a spouse to save tax, unless it is transferred to you on the death of an earlier spouse. Your RRIF and LRIF withdrawals will not qualify as pension income until you reach 65. It’s another example of discriminatory treatment toward folks without a pension plan.

This entry was posted on 3. April 2010 at 12:36 and is filed under Tax, Taxation. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response or trackback from your own site.