It’s your Money
– Keep It!
Two tax-saving strategies
1. Income
splitting
2. Pension income
tax credit
Income Splitting
Now available for income splitting
 Married & common
law couples
 Spouses can split
retirement income
 Save thousands in
taxes each year
 Have up to 50%
eligible income
transferred to lower
income spouse
Eligible
 Life annuity payments from a Registered
Pension Plan (RPP)
 Annuity payments from a Registered
Retirement Savings Plan (RRSP)
 Withdrawals from a Registered Retirement
Income Fund (RRIF)
 Annuity and installment payments out of a
Deferred Profit Sharing Plan (DPSP)
Eligible, continued
 Income from some foreign pension arrangements
and U.S. Individual Retirement Accounts (IRAs)
 The interest element of a non-registered annuity
contract (prescribed and non-prescribed)
 Accrued (interest) income from a non-registered
deferred annuity contract such as a Guaranteed
Investment Contract (GIC) provided by an
insurance company
Not eligible
 Old Age Security (OAS)
 Canada / Quebec Pension Plan
(CPP / QPP)
 Lump-sum death benefits
 Retiring allowances
Not eligible, continued
 Salary deferral arrangements, retirement
compensation arrangements, employee
benefit plans and employee trust plans
 Gains resulting from a policy loan or
disposition
 Capital gains, dividends and interest
Income splitting options
1. Eligible income
2. Canada/Quebec
Pension Plans
3. Spousal RRSPs
Eligible income
 Split up to 50%
 Optimum
transfer may be
less than 50%
Canada/Quebec Pension Plans
 Spouses of at
least 60 years of
age can share
up to 50% of
benefits earned
while living
together
Spousal RRSPs
 Income splitting
at any age
 Not restricted
to 50%
 Younger spouse –
delayed until the
year after spouse
reaches age 71
Example 1
No Splitting
With Splitting
Marie
John
Marie
Company
Pension
$85,000
-
$42,500
$42,500
-
RRIF/Spousal
RRIF
$19,000
$10,000
$13,892
$15,108
-
CPP
$10,365
-
$10,365
-
-
OAS
$5,903
$5,903
$5,903
$5,903
-
$120,268
$15,903
$72,770
$63,511
-
($35,460)
($1,138)
($16,668)
($13,770)
-
($5,903)
-
($1,372)
-
-
-
$1,034
-
$45
-
$78,905
$15,799
$54,620
$49,786
Increase
$9,702
Gross income
Tax1
OAS clawback
Age credit2
After-tax
income
For illustrative purposes only.
Taxes owing are calculated using graduated rates for the province of British Columbia taking into account the
Basic Personal Exemption and the Pension Income Credit ($367) if applicable. Generally others will also apply.
2 The Age Credit is $1,034 less clawbacks.
1
Difference
John
Example 2
No Splitting
With Splitting
Elaine
Jim
Elaine
Company
Pension
$85,000
-
$42,500
$42,5003
-
RRIF/Spousal
RRIF
$19,000
$10,000
$9,500
$19,500
-
CPP
$10,365
-
$5,183
$5,182
-
OAS
$5,903
-
$5,903
-
-
$120,268
$10,000
$63,086
$67,182
-
($35,460)
($222)
($13,896)
($14,895)
-
($5,903)
-
-
-
-
-
-
$311
-
-
$78,905
$9,778
$49,501
$52,287
Increase
$13,106
Gross income
Tax1
OAS clawback
Age credit2
After-tax
income
For illustrative purposes only.
Taxes owing are calculated using graduated rates for the province of British Columbia taking into account the
Basic Personal Exemption and the Pension Income Credit ($367) if applicable. Generally others will also apply.
2 The Age Credit is $1,034 less clawbacks.
3 Even though under age 65, Elaine now has a Pension Income Credit on the transferred company pension income.
1
Difference
Jim
The Pension
Income Tax
Credit
Reduce taxes even more
 Even at age 65
or older
 Available even
without income
from RRIF or
private pension
Pension income tax credit
 Deduct a tax credit equal to 15.5% on
first $2,000
 Up to $310 in federal tax savings
 Plus provincial tax credits
 Non-refundable
Eligible
 Life annuity payments from a Registered
Pension Plan (RPP)
 Annuity payments from a Registered
Retirement Savings Plan (RRSP)
 Withdrawals from a Registered Retirement
Income Fund (RRIF)
 Annuity and installment payments out of a
Deferred Profit Sharing Plan (DPSP)
Eligible, continued
 Income from some foreign pension arrangements
and U.S. Individual Retirement Accounts (IRAs)
 The interest element of a non-registered annuity
contract (prescribed and non-prescribed)
 Accrued (interest) income from a non-registered
deferred annuity contract such as a Guaranteed
Investment Contract (GIC) provided by an
insurance company
Not eligible
 Old Age Security (OAS)
 Canada / Quebec Pension Plan
(CPP / QPP)
 Lump-sum death benefits
 Retiring allowances
Not eligible, continued
 Salary deferral arrangements, retirement
compensation arrangements, employee
benefit plans and employee trust plans
 Gains resulting from a policy loan or
disposition
 Capital gains, dividends and interest
Creating the income from an insurance
GIC
Annual
Interest Rate
4%
Non-Registered
Savings Required
$50,000
5%
$40,000
6%
$33,333
7%
$28,570
8%
$25,000
Income splitting where both spouses
are age 65 or more
 Invest double the amount of nonregistered savings
 Make an election on tax returns to
each claim $2,000
 Maximize tax benefits of the $2,000
 Double your tax credits
Transferring unused credits to a spouse
 At least age 65
 Have eligible income but unable to use
full credit
 Transfer unused portion to spouse
 Receiving spouse can claim at any age
 No eligible income required
Speak to your advisor
 Income splitting
and pension
income tax credit
 Two ways to
minimize tax
during retirement
 Maximize your
retirement
income
Important notes
The commentary in this presentation is for general information only and should not be
considered investment or tax service to any party. Individuals should seek the advice
of professionals to ensure that any action taken with respect to this information is
appropriate to their specific situation.
Manulife Investments is the brand name identifying the personal wealth management
lines of business offered by Manulife Financial and its subsidiaries in Canada. As one
of Canada’s largest integrated financial services providers, Manulife Investments offers
a variety of products and services including: segregated funds, mutual funds, principal
protected notes, annuities and guaranteed interest contracts.
Manulife and the block design are registered service marks and trademarks of The
Manufacturers Life Insurance Company and are used by it and its affiliates including
Manulife Financial Corporation.