Can I rollover my retirement allowance into an RRSP?

Jamie Golombek, vice-president of taxation and estate planning at AIM Trimark Investments, has the answer.

Jamie Golombek 1 March, 2002 | 2:00PM

Dear Expert:

I have been told that you are allowed a one-time rollover of severance pay into an RRSP, regardless of whether you have the contribution room in your RRSP. Is this correct?

Expert Opinion:

Severance pay in recognition of years of service may be considered a retiring allowance for tax purposes. If so, there are rules that permit a "rollover", or transfer, of a retiring allowance into an RRSP, regardless of whether you have contribution room available. This is not a one-time rollover, but would apply to any retiring allowance that you receive.

But there are limitations. The amount that can be transferred tax-free is limited to $2,000 per year for every year worked prior to 1996 and an additional $1,500 (i.e. $3,500) for each year of service prior to 1989 during which time the employer was not a member of a pension plan or deferred profit sharing plan. The limitation on pre-1996 qualifying years would generally restrict someone from rolling over a severance package to an RRSP, unless they have been working for the same employer for a substantial period of time. For years worked after 1995, no amount may be transferred to an RRSP in respect of those years.

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Jamie Golombek

Jamie Golombek