# Pension Buy back question- tax implications



## showmethemoney45 (Feb 27, 2015)

Hi intelligent people,

I'm trying to help my mom who is about to retire. She and I have a few questions. She would like to buy back some of her pension from some really early years which will cost her a little over 100k. With the guaranteed for life option this is what is best for her. Now, she has money in IG RRSP's which are robbing her blind and would like to consider moving that money over to the pension. Would there be tax implications if money was moved from IG RRSP to the pension plan? Do you think the pension plan people would do this for her?

She also has the option of paying cash for the buy back. What would be the tax implications for this if she's already maxed out her yearly RRSP contributions for the year? Is pension buy back the same as putting money into RRSP? This might not be a good option if she gets penalized from the CRA....

Thank you for the responses!


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## Daniel A. (Mar 20, 2011)

http://www.cra-arc.gc.ca/tx/ndvdls/tpcs/rrsp-reer/trnsfrrng/menu-eng.html


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## OhGreatGuru (May 24, 2009)

For cash buybacks, "Pension Buyback" is covered under "Past Service Contributions" in Chapter 1 of CRA T4040. Working it out can be a bit complicated. The total amount you can deduct depends on the number of calendar years in which the past service occurred; and when those years occurred. There are forms that help you calculate this, but your Pay & Benefits Office should also issue a tax slip stating how much of the total buy-back cost is an eligible past service contribution. 

There is also an annual limit that you can deduct in any tax year ( I think $3500) but you can carry forward undeducted amounts to future years, until eventually you have claimed all the eligible amount. 

This would be additional to your normal RRSP room. But unlike regular RRSP contributions, you will likely have to spread the tax deductions over several years.


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