A younger spouse does not automatically prevent a couple from splitting pension income.
This is one of the most misunderstood parts of Canada’s pension income-splitting rules. A 68-year-old pension recipient may be able to allocate eligible pension income to a 58-year-old spouse. The receiving spouse does not need to be retired, and they do not need to have pension income of their own.
Age still matters, but it usually matters most when determining whether the original income qualifies and whether the younger spouse can claim the pension income amount.
Understanding that distinction can help couples avoid overlooking a valuable annual tax-planning opportunity.
Does the Receiving Spouse Have to Be 65?
No.
The CRA permits eligible pension income to be split with a spouse or common-law partner regardless of the receiving spouse’s age, provided all the other conditions are satisfied.
For example, pension splitting may be possible when:
- One spouse is 68 and the other is 60
- One spouse is 66 and the other is 55
- One spouse is 61 and the other is 58
- One spouse is retired while the other is still working
The receiving spouse’s age does not determine whether the couple can make the election.
The age and circumstances of the spouse who originally receives the pension income are usually more important.
Who Is the Transferring Spouse?
The transferring spouse is the person who originally receives the eligible pension income.
The pension provider continues paying that spouse directly.
The receiving spouse does not become an owner of the pension. Instead, the couple uses Form T1032 to allocate part of the eligible income for tax purposes.
The transferring spouse:
- Reports the full pension income
- Claims a deduction for the elected split amount on line 21000
- Allocates a proportionate amount of tax withheld to the receiving spouse
- Reports the elected amount on line 11600
- Claims the allocated portion of the related tax withholding
- May be eligible for a pension income amount, depending on the circumstances
Only one joint pension-splitting election can be made for a tax year.
Book A Pension Consultation Call - Don't Delay!
Click the button below to book a consultation call with a Certified Financial Planner. With more than 25 years of experience, our approach is clear and practical. We help simplify pension, investment, retirement, estate, and tax planning so you can focus on what matters most. We've had the privilege of advising retirees and employees from organizations such as Ontario Teachers, Stelco, UPS, ArcelorMittal Dofasco, GM, and many others. Book a free 15-minute consultation call today.
Which Pension Income Can Be Split Before Age 65?
The type of income is critical.
A person under age 65 may commonly be able to split qualifying lifetime pension payments from a registered pension plan.
This can include a lifetime pension received from:
- A former employer’s defined-benefit pension plan
- Certain registered pension arrangements
- Some qualifying pension annuities
- Certain survivor pension arrangements
A 61-year-old receiving an employer pension may therefore be able to allocate part of that pension to a 58-year-old spouse.
The receiving spouse does not need to be 65.
RRIF Income Usually Follows Different Age Rules
RRIF and LIF income generally become eligible for pension income splitting when the original recipient is at least 65 at the end of the tax year.
Special rules can apply when the income is received because of the death of a spouse or common-law partner.
This creates an important distinction.
Example 1: Employer pension
A 62-year-old receives a lifetime employer pension.
That pension may qualify for splitting with a 59-year-old spouse.
Example 2: RRIF withdrawal
A 62-year-old withdraws money from a RRIF.
That income generally does not qualify for the ordinary age-based pension-splitting election solely because it came from a RRIF.
Example 3: RRIF after age 65
A 67-year-old receives RRIF income.
The income may qualify for splitting with a 58-year-old spouse.
The younger spouse’s age does not prevent the election.
Ordinary RRSP Withdrawals Do Not Automatically Qualify
An ordinary withdrawal from an RRSP is not automatically eligible pension income.
This remains true even when:
- The withdrawal is used to fund retirement
- The account owner is retired
- The payment is received monthly
- The recipient calls it retirement income
Certain qualifying RRSP annuity payments can receive different treatment, but a regular lump-sum or periodic RRSP withdrawal should not be included on Form T1032 without confirming eligibility.
The legal and tax structure of the payment matters more than how the money is being used.
CPP and OAS Cannot Be Split Through Form T1032
CPP, QPP and OAS do not qualify for the CRA’s pension income-splitting election.
CPP has a separate pension-sharing program for eligible spouses and common-law partners.
CPP pension sharing and tax-return pension splitting are different strategies.
CPP pension sharing
- May change the amount paid directly to each spouse
- Is administered through the CPP program
- Depends on the couple’s joint contribution history and eligible relationship period
Pension income splitting
- Is an annual income-tax election
- Does not change who receives the pension payment
- Is completed using Form T1032
- Applies only to qualifying pension income
OAS cannot be transferred or shared through either Form T1032 or the CPP pension-sharing process.
What Happens When the Younger Spouse Still Works?
A working spouse can receive split-pension income.
However, transferring pension income to a working spouse may or may not reduce the household’s tax.
Suppose:
- Retired spouse receives $70,000 of eligible pension income.
- Younger spouse earns $65,000 from employment.
Allocating $25,000 of pension income to the working spouse could increase that spouse’s taxable income to $90,000.
The couple may receive little benefit if both spouses are already in similar tax brackets.
In another household:
- Retired spouse receives $100,000.
- Younger spouse earns $25,000.
A pension split may produce meaningful savings.
The decision depends on both spouses’ complete incomes rather than age alone.
The Younger Spouse May Not Receive the Same Pension Tax Credit
Pension income splitting and the federal pension income amount are separate calculations.
The federal pension income amount may provide a non-refundable tax credit based on up to $2,000 of eligible pension income.
The transferring spouse may qualify for the pension income amount because of the pension they receive.
The younger receiving spouse does not automatically qualify for the same credit simply because income was allocated to them.
Eligibility can depend on:
- The receiving spouse’s age
- The type of pension income
- Whether the income arose after a spouse’s death
- How the original payment is reported
The CRA directs couples to Step 4 of Form T1032 to calculate the pension income amount available to each spouse.
A pension split can still save tax even when the younger spouse cannot claim the full pension income amount.
Example: Employer Pension Split With a Younger Spouse
Suppose:
- Jordan is 67.
- Taylor is 59.
- Jordan receives $72,000 from an employer pension.
- Taylor earns $30,000 from part-time work.
- The full employer pension qualifies.
Jordan and Taylor elect to allocate $24,000.
For tax purposes:
- Jordan reports the full $72,000 pension.
- Jordan claims a $24,000 deduction on line 21000.
- Taylor reports $24,000 on line 11600.
- The related pension tax withholding is allocated proportionately.
Their resulting incomes before other deductions become approximately:
- Jordan: $48,000
- Taylor: $54,000
The strategy may reduce the amount taxed at Jordan’s higher marginal rate.
Taylor’s age does not prevent the split.
The pension income amount available to Taylor must be calculated separately under Form T1032.
Example: Pension Split to a Younger High-Income Spouse
Suppose:
- Morgan is 68 and receives a $60,000 employer pension.
- Alex is 58 and earns $110,000.
Allocating pension income to Alex could place the transferred income in a higher tax bracket.
In this situation:
- A smaller split may be appropriate.
- No split may be best.
- Morgan may remain the lower-income spouse despite being the pension recipient.
The 50% maximum is an option rather than a recommendation.
Can the Pension Be Split When the Couple Married During the Year?
Potentially, but the eligible amount may need to be prorated.
Form T1032 contains a calculation for situations where the couple married or entered a common-law relationship during the tax year.
The form considers the number of months during which the qualifying relationship existed before determining the maximum split.
A couple who married in October should not assume they can split a full year of pension income.
Can Pension Income Be Split When the Couple Lives Apart?
The couple may remain eligible when living apart for reasons unrelated to a relationship breakdown, such as:
- Medical care
- Education
- Employment
- Business obligations
- Long-term care
The election is generally unavailable when the spouses have been living separate and apart because of a relationship breakdown for a continuous period of at least 90 days that includes December 31.
The reason for living apart matters.
Residency Requirements
Both spouses generally must be residents of Canada on December 31 of the tax year.
When one spouse dies during the year, the relevant residency date can be the date of death.
Cross-border couples should obtain specialized tax advice before assuming the election is available.
How Much Can Be Allocated?
The transferring spouse may allocate up to 50% of eligible pension income.
The couple may choose:
- 10%
- 20%
- 35%
- 50%
- Any permitted dollar amount below the maximum
The chosen percentage can change annually.
A younger spouse’s income may change significantly from year to year because of:
- Employment
- Bonuses
- Business income
- Maternity or parental leave
- Career changes
- Retirement
- Investment gains
The split should be recalculated each year.
How Is Tax Withholding Divided?
The pension provider usually deducts tax from the original recipient’s payments.
When pension income is split, the related withholding must be allocated in the same proportion.
For example, when 30% of eligible pension income is transferred, 30% of the tax withheld on that eligible income is generally allocated to the receiving spouse’s return.
The pension provider does not issue a new slip in the younger spouse’s name.
The adjustment is made on Form T1032 and the spouses’ tax returns.
How Can a Younger Spouse Affect OAS Planning?
A spouse under 65 does not receive OAS.
This can make pension splitting especially useful when the older spouse is above the OAS recovery-tax threshold and the younger spouse has room to receive income without creating an OAS clawback of their own.
For example:
- Older spouse receives OAS and has income of $108,000.
- Younger spouse has income of $35,000.
- Eligible pension income is available.
Allocating some pension income may reduce the older spouse’s recovery tax while the younger spouse has no OAS payment at risk.
Once the younger spouse turns 65 and begins OAS, the strategy should be recalculated.
What Changes When the Younger Spouse Turns 65?
Turning 65 may create additional planning opportunities.
The younger spouse may:
- Begin receiving OAS
- Become eligible to split their own RRIF income
- Qualify for additional pension-related credits
- Begin mandatory or discretionary retirement withdrawals
- Face OAS recovery-tax exposure
- Retire from employment
The direction and amount of the pension split may change.
For example, the spouse who previously received transferred pension income may later become the transferring spouse because their RRIF income is larger.
Only one joint election can still be made in a year.
Should a Younger Spouse Convert an RRSP to a RRIF?
Converting an RRSP to a RRIF can create retirement income, but it does not automatically make that income eligible for splitting before the account owner reaches 65.
A partial RRIF conversion may become useful at or after 65 because:
- Qualifying income may be split
- The pension income amount may become available
- Regular withdrawals can be established
- The household can coordinate taxable income
The decision should also consider:
- Future mandatory withdrawals
- OAS recovery tax
- Investment strategy
- Current income needs
- Estate taxation
Do not convert solely because one spouse is older.
Questions to Ask Before Making the Election
- Which spouse originally received the pension income?
- Does the income qualify before age 65?
- Is it an employer pension, RRIF, LIF or RRSP withdrawal?
- Is the receiving spouse still working?
- What is each spouse’s taxable income?
- Will the receiving spouse qualify for the pension income amount?
- Does the older spouse receive OAS?
- Could the split reduce OAS recovery tax?
- Does the younger spouse have other large income?
- What happens at 10%, 25% and 50%?
- Did the relationship begin during the year?
- Were the spouses separated for any part of the year?
- Are both spouses Canadian residents?
- Has the related tax withholding been allocated?
- Do both spouses agree to the election?
Pension Solutions Canada can help explain your pension options. Book a free consultation call.
Disclaimer: This article provides general Canadian tax information. Pension income-splitting eligibility depends on the type of income, the transferring spouse’s age, the relationship, residency and both spouses’ complete tax circumstances.
