Retiring allowances and RRSPs

Individuals who receive an amount from their former employers upon dismissal or retirement in 2016 may be eligible to contribute an extra amount to their RRSP or RPP.

The maximum amount that can be transferred to your RRSP or RPP is $2,000 multiplied by the number of years you worked for your employer before 1996. You can also add in $1,500 multiplied by the number of years you were employed prior to 1989 in which your employer did not make vested contributions to a registered plan on your behalf. The contribution, which is in addition to your regular contribution limit, must be made to your own retirement plan, not your spouse’s.

Tax tip: If the portion of your retiring allowance that’s eligible to be transferred to your RRSP is paid directly to your RRSP, your employer will not be obligated to withhold income tax.