Managing your taxes

It’s important to remember that your pension is considered taxable income. This means OPB (on behalf of the PJPB) is required to deduct tax from your pension payments. Although your pension is paid as one payment from three sources – the Registered Pension Plan (RPP), the Retirement Compensation Arrangement (RCA) and the Supplemental Pension Plan (SUP) – tax is deducted based on the sum paid to you.

The amount of tax deducted from your monthly payment will be based on:

• the government tax tables for the province you live in; or
• if living outside Canada, the tax table for that country; and
• any personal tax-related information provided to OPB on behalf of the PJPB.

These amounts will be reported in two slips: the RPP and SUP amount on your T4A and your RCA on your T4A RCA.

Pension income splitting

For tax-reporting purposes, up to 50% of eligible pension income may be allocated to a spouse, with the spouse’s consent. This is known as pension income splitting.

Eligible pension income that qualifies for splitting includes the part of your pension paid from the RPP component of the PJPP. At age 65, eligible pension income will also include the part of your pension paid from the RCA component, subject to an overall eligible income limit allowed under the ITA.

Pension income splitting does not affect the payment of your pension but can reduce the amount of income tax you pay. No funds are transferred; you simply allocate income to the tax return of your spouse and complete a T1032 Joint Election to Split Pension Income form(opens in a new tab).

Keep in mind that not all retirement income qualifies for pension income splitting, so it is important to get professional advice from a licensed tax advisor if you intend to use this tax strategy.