Guide
Pension income splitting: a worked example
A couple may move up to 50.0% of one spouse’s eligible pension income onto the other’s return, so that it is taxed at the lower rate. An employer pension is eligible at any age; RRIF withdrawals from 65. For the Quebec couple below it saves $62,552 of income tax over the plan. For a couple with equal incomes it does almost nothing.
The short answer
The Quebec couple, 61 and 59, one retired on an employer pension of $41,000 a year and one still earning $76,000, pay $1,576,314 of income tax over the plan without splitting and $1,513,762 with it, in today’s dollars: $62,552 saved, and $46,771 less OAS recovered.
The rule
- Up to 50.0% of eligible pension income can be allocated to a spouse or common-law partner, by a joint election made each year on both returns.
- Employer pension income is eligible at any age. RRIF and annuity income becomes eligible from 65. CPP, QPP and OAS are not eligible; CPP can be shared by a separate application, on different terms.
- The planner moves the amount that equalises the couple’s taxable incomes, up to the half. The amount is a choice each year, and moving less is allowed.
The Quebec couple, year by year
The first ten years of the plan, both households drawing their savings in the same order so that only the election differs. “Moved” is the pension income allocated to the other spouse that year.
| Year | Age of the first person | Moved | Tax without | Tax with | Saved |
|---|---|---|---|---|---|
| 1 | 61 | $0 | $30,810 | $30,810 | $0 |
| 2 | 62 | $0 | $31,054 | $31,054 | $0 |
| 3 | 63 | $0 | $31,305 | $31,305 | $0 |
| 4 | 64 | $0 | $31,560 | $31,560 | $0 |
| 5 | 65 | $0 | $40,999 | $40,999 | $0 |
| 6 | 66 | $0 | $41,419 | $41,419 | $0 |
| 7 | 67 | $20,500 | $19,671 | $12,019 | $7,651 |
| 8 | 68 | $20,500 | $18,497 | $12,094 | $6,403 |
| 9 | 69 | $20,500 | $21,196 | $18,503 | $2,693 |
| 10 | 70 | $20,500 | $21,383 | $18,756 | $2,628 |
In the first year $0 moves and the couple save $0. The saving shrinks once the working spouse retires and the two incomes come closer, and it changes again when RRIF income becomes eligible.
The OAS clawback
Because splitting lowers the higher earner’s net income, it also lowers the OAS recovery tax for a couple where one spouse is over the threshold and the other is not. For the Quebec couple that is $46,771 less recovered over the plan, on top of the income tax saved.
A couple with equal incomes
The Ontario couple, both 52, both working, with similar RRSPs, have little to move: the first allocation happens at 65, once their RRIF withdrawals differ, and it is $10,762 that year. Over the whole plan the election costs them $5,890 of income tax and leaves $34,636 less at the end. Equalising two incomes that are already nearly equal moves a few dollars across a threshold and back; for this couple the election is worth making in the years it helps and skipping in the years it does not, which is a choice the return allows.
Computed with Retirafy’s engine on the 2025 federal and provincial tables, in today’s dollars. How the projection works.
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