Can I transfer a pension payout to an RRSP without contribution room?

Gena Katz, a chartered accountant and principal with Ernst and Young, has the answer.

Gena Katz 15 May, 2003 | 1:00PM
Dear Expert:

I left a company that gave me a buyout package and I have invested the most I can in RRSPs so I wouldn't be taxed on this money. Now I have received a letter regarding my pension, which gives me two choices: At age 65, receive $1,695.75 per month, or take a lump sum of $49,574.71 now and transfer this amount to a locked-in RRSP. I have already maxxed out my RRSP limit, so does this mean I can't put this money in a locked-in RRSP? I have about $50,000 in my RRSP right now. I am 41 years old and married with three children. My husband works, but has no pension plan and only about $10,000 in his RRSP.

Expert Answer:

The lump-sum pension amount that you can transfer to a locked-in RRSP is not affected by your regular RRSP contribution room. This is a permitted contribution in excess of your regular annual limits. However, the lump-sum pension transfer can only be made to your own RRSP and not to a spousal plan. As a result, you may consider making your regular annual contributions to a spousal plan in order the balance retirement income received from your personal and spousal plans.

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Gena Katz

Gena Katz