# Re-Paying Pension Plan via RRSP



## Arcaneind (Apr 3, 2009)

G'day all!

My wife is taking a leave of absence from work without pay in mid-March. To keep up with her employer's pension plan they have given her the following options to buy back the time:

1) Write a cheque ($2000+)
2) Transfer the funds from an existing RRSP account
3) Go without and work longer (not!)

I was thinking that we dump the cash into her RRSP Direct Brokerage account prior to March 1st, 2010 RRSP deadline and then transfer it over to the pension plan from there. That way we could claim the money on 2009's taxes instead of next year.

Any thought? Pros or cons that you see?


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## MoneyGal (Apr 24, 2009)

Can you transfer the funds from an RRSP directly, or do you have to do a withdrawal?


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## Arcaneind (Apr 3, 2009)

I understand that it is a direct transfer from the RRSP to the Pension.


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## MoneyGal (Apr 24, 2009)

If that is the case, the consideration I would have would be complexity. All things being equal, I would choose the simple solution. In your case, my vote would be contribute to the pension plan directly - only because it is the simplest solution.


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## Lloyd Christmas (Feb 11, 2010)

Hi there, 

I'm a new member here and here's my opinion and thoughts regarding your wife's pension buy back options.

1- Write a cheque from non-registered funds to buyback.....since the funds are being used for a pension buy back the amount is deemed a contribution to a pension plan and since it is not coming from an existing rrsp the contribution is eligible for a deduction....only thing is.....the deduction is usually stated on your T4 and you will not be able to use till you file your taxes next year.....even if you make the buyback in the first 60 days of 2010 I'm 90% sure that you cannot use it as an income deduction till next year.

2- Transfer funds from an existing rrsp - This is easy enough to do and there is no tax benefits associated unless you proceed like you said and make a contribution to the rrsp first to then transfer to the pension. Since the funds are already "registered" funds this should not affect your future rrsp room via a "PA" / pension adjustment. My thoughts are more around what is the pension plan that is being bought back like? Is it indexed to inflation, what is the solvency ratio like? In all liklihood if it is lets say an OMERS, HOOP or a teachers pension plan it is usually a no brainer to buyback depending on a number of other things such as what is your pension like, how far away from retirement are you guys, life expectancy, etc. Also as a precaution make sure she has the rrsp room available because is she has a "healthy" pension her Pension Adjustments may have eaten away at all her rrsp contribution room.

3- Go without - obviously not an option!

My line of thinking would be to take advantage of getting the rrsp deduction to use against 2009 income taxes for her primarily because her 2009 income will be higher than 2010's income (I'm making an assumption here) therefore the benefit of the 2000.00 will be worth more to her on her 2009 tax return plus it has a year to be invested. And completing the buyback using rrsp funds is usually very easy paperwork. 

At the end of the day I would opt for the rrsp contribution and then transfer option. However on $2000.00 the difference in benefit between the two options will be very marginal regardless of how you do it.


Hope this helps


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