Pension options after leaving your job

Discover the many different options available to you for the contributions you've made into the plan.

Tax implications of lump-sum pension payment options

No income tax will be deducted from any payment to a registered retirement savings plan (RRSP), locked-in retirement account (LIRA), life income fund (LIF), the registered pension plan (RPP) of a new employer or a life insurance company to purchase a deferred lifetime annuity.

Any payment not transferred to an RRSP, LIRA, LIF or RPP will have income tax deducted. Tax is deducted at the following rates for Canadian residents, where applicable:

  • 10 per cent for payments of $5,000 or less
  • 20 per cent for payments of $5,000.01 to $15,000
  • 30 per cent for payments of $15,000.01 or more

If you are not a Canadian resident at the time of the lump-sum payment, the amount of tax withheld is based on the country of residency (25 per cent is common).

The above flat rates are set by the Canada Revenue Agency. These rates do not represent the actual tax that you may owe, which is calculated based on your personal tax rate when you file your tax return for the year in which you receive the lump-sum payment.

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