Gordon & Theresa: Pension Income Splitting and RRIF Minimums

By Seun Adeyemi, CFP®, CKA®

Published October 1, 2026 8 min read

In this article

• The Situation
• The Complication
• What We Found
• The Decision
• The Outcome
• What This Might Mean for You
• Frequently Asked Questions

They did not come in with a tax question. They came in with a grandchild question. Two of their grandchildren start university within three years, and Gordon and Theresa wanted to know whether helping with tuition would put their own retirement at risk. That was the whole agenda for the first meeting. The tax work surfaced on the way to answering it.

The Situation

Gordon, 70, retired six years ago from a manufacturing firm in Durham Region after 31 years. His defined benefit pension pays approximately $2,850 per month. He started CPP at 65, which pays approximately $1,010 per month, and he receives full OAS. His registered savings sit in a single RRSP of approximately $880,000.

Theresa, 64, worked part-time for most of their marriage — school board administration, mostly, around three children. She has no pension. Her CPP at 65 is projected at approximately $520 per month. She has an RRSP of approximately $95,000 and a TFSA of approximately $48,000.

Their combined investable assets are approximately $1.02 million, held in segregated funds through the insurance advisor who sold them their first policy in 1998 and who has handled everything since.

Their taxes are prepared each spring by a bookkeeper in a strip plaza near their home, who has done them for eleven years, one return at a time.

“We’re not complicated. One pension, one RRSP, whatever CPP gives us. There’s nothing here to plan.”

— Gordon, at their first meeting

This is a composite case study. Names, ages, and financial figures are illustrative. It is based on real planning scenarios we encounter with retired Canadian couples whose income is concentrated in one spouse.

The Complication

Gordon was right that the household was simple. He was wrong about what that meant.

Gordon’s taxable income runs approximately $55,000 a year. Theresa’s runs under $10,000. In Ontario, that puts Gordon’s top dollars in the neighbourhood of a 30% combined marginal rate today, while Theresa has thousands of dollars of unused room in the lowest bracket and credits she cannot fully use against the income she has.

Every year since Gordon’s pension started, the household has paid tax on income concentrated in one person’s hands while the other person’s low-rate room went unused. The fix has existed in the Income Tax Act since 2007. It requires no transfer of money, no separate account, and no change to how the pension is paid. It requires one form, signed by both people, filed with both returns.

Nobody had filed it.

The bookkeeper prepares each return as a standalone job, and a standalone return cannot see the opportunity — the election only exists in the relationship between two returns. The insurance advisor manages investments and does not do tax. Each of them was doing the job in front of them. The gap was between the jobs.

And there was a second thing, closer and harder.

Gordon turns 71 next year. By December 31 of that year he must convert his RRSP into a RRIF or an annuity. At the moment the RRIF is established — that moment, not later — he can elect to have his annual minimum withdrawals calculated on Theresa’s age instead of his own. She is six years younger. The election cannot be reversed, cannot be added afterward, and will not be offered again.

He had never heard of it.

What We Found

The full picture pulled four things into the same conversation for the first time.

The election that was never made. Periodic payments from a registered pension plan qualify for income splitting at any age, which means Gordon’s pension has been eligible since it started six years ago. Splitting up to 50% of it would have moved roughly $17,000 a year onto Theresa’s return, at a rate difference of roughly ten percentage points. The cost of not doing it was in the range of $1,500 to $1,800 a year, every year, for six years.

How much of that was recoverable. CRA’s administrative policy generally permits a late or amended pension-splitting election within three calendar years of the filing due date. Three years could be reopened. The three before that could not. Roughly $9,400 was recoverable. Roughly $5,000 was not.

What happens at 72. Once Gordon’s RRIF begins, the minimum withdrawal is mandatory whether he needs the money or not. At 72, the minimum factor is 5.40% of the January 1 balance. On a RRIF of roughly $920,000, that is approximately $49,700 of forced taxable income landing on top of a pension, CPP and OAS. His net income would reach approximately $103,000 — above the 2026 OAS recovery threshold of $95,323, which triggers a repayment of 15 cents on every dollar above it. He was six years from a clawback nobody had mentioned, created entirely by a withdrawal rule rather than by anything he wanted to spend.

What the guarantees were costing. Their segregated funds carried all-in fees of approximately 3.1%. The contracts provide a death benefit guarantee and creditor protection. Gordon is a retired employee with no business creditors. Their registered accounts have named beneficiaries, which already pass outside the estate without probate. They were paying roughly 165 basis points a year above a fee-based portfolio for protection against risks their situation does not contain. On $1.02 million, that is approximately $16,800 a year.

None of these four items is dramatic on its own. Together they were the difference between the retirement they had and the retirement they had paid for.

The Decision

The plan came down to three moves and one deliberate non-move.

Elect pension income splitting, starting with this filing year. Approximately $17,100 of Gordon’s pension income moves onto Theresa’s return. Once his RRIF income begins and both are over 65, the eligible base grows and the split grows with it.

Reopen the three recoverable years. Amended returns for both of them, with the joint election attached to each year.

Make the spousal-age election at RRIF conversion. Minimums calculated on Theresa’s age rather than Gordon’s. In the year he turns 72 she is 66, which sets the factor at approximately 4.17% rather than 5.40% — roughly $38,300 of required withdrawal instead of roughly $49,700.

Move the portfolio to fee-based management, with the segregated fund contracts surrendered on a schedule that respects the deferred sales charge runoff rather than eating a penalty to move faster.

The deliberate non-move: Theresa does not start CPP early to balance the household income. Splitting already solves the imbalance, and taking her CPP at 62 to fix a problem the election fixes for free would have cost her a permanent reduction for the rest of her life.

One timing detail shaped the sequence. Theresa turns 65 next year. Until she does, she cannot claim the pension income amount against RRIF income split from Gordon. The plan states which piece starts in which year rather than assuming everything begins at once.

The Outcome

“Eleven years with the same person doing our taxes. Eleven years. Nobody ever put the two returns side by side.”

— Gordon, after the Life-First Plan™ was delivered

What This Might Mean for You

There is a particular kind of loss that never shows up as a loss. No statement reports it. No advisor calls to apologize for it. It is the money that quietly stays with the government because a form was not filed, or the money that leaves your account as a fee for a guarantee you did not need.

Gordon and Theresa did not make a bad decision. They made no decision, repeatedly, for six years — and no decision is a decision that compounds.

The pattern behind their situation is common in Canadian households where one person earned the pension. Tax returns get prepared individually, because that is how returns are filed. Investments get managed by whoever sold the first product. Nobody is assigned to the space between the two, and the space between the two is where most retirement tax planning lives.

If one spouse’s income is substantially larger than the other’s, ask a direct question this year: has a pension income splitting election been filed for us, and if not, how many years are still open? The answer takes a bookkeeper about four minutes to look up.

And if you are approaching 71 with a spouse younger than you, the RRIF conversion is not paperwork. It is a decision with one date attached to it. Most people sign it in a branch in under ten minutes, without being told which box is the one they can never tick again.

The plan did not make Gordon and Theresa wealthier. It stopped them from being quietly poorer.

Related reading on askacfp.ca: Pension Income Splitting in Canada: What It Is and How to Use It

Related reading on askacfp.ca: RRIF Minimum Withdrawals Explained: Rules, Rates, and Tax Impact

Related reading on askacfp.ca: How OAS Clawback Works — And How to Avoid It

If you are newly retired and drawing income without a sequenced plan behind it, that is the same gap seen from the other side — see how Sébastien and Lise built their drawdown strategy.