I’m very curious about the conversation on dumping GL’s money into RRSPs instead of mortgage payments. It’s an interesting concept but wouldn’t taking out a long mortgage (say 30 years) and making minimum payments on it while depositing the surplus money into RRSPs, high dividend yeilding stocks, or growth stocks have a similar effect?

Freezie

I think what you have posted (in it’s up to date form) suggests that lump sums would indeed qualify. I suppose the auditor would have the final say? :) For readers, I would suggest that it’s best to discuss this with a qualified professional advisor for your own situation before acting on this information (or any information on this site).

Official CRA position is often difficult to come across. The following may be helpful; it’s from a former bulletin IT-517R which CRA archived, so it’s not on their site anymore. But it’s still in the CCH software. This is also the same wording CCH uses in their current tax preparation material.

See 2(a)(iii)

2. An individual who has attained the age of 65 years before the end of the year is entitled to a pension tax credit determined by multiplying the lowest Part I tax rate percentage (currently set at 17%) by the lesser of $1,000 and the individual’s “pension income” received in the year. Subject to ¶8 below, subsection 118(7) defines “pension income” received by an individual in a taxation year as the sum of

(a) the total of all amounts included in computing income for the year each of which is

(i) a payment in respect of a life annuity out of or under a superannuation or pension plan, including a foreign plan;

(ii) an annuity payment under a registered retirement savings plan (RRSP), under an “amended plan” as referred to in subsection 146(12), or under an annuity in respect of which an amount is included in income under paragraph 56(1)(d.2) (see comments in ¶3 below);

(iii) a payment out of or under a registered retirement income fund (RRIF), or under an “amended fund” as referred to in subsection 146.3(11);

(iv) an annuity payment under a deferred profit sharing plan (DPSP) or under a “revoked plan” as referred to in subsection 147(15);

(v) an instalment payment out of a DPSP as described in subparagraph 147(2)(k)(v) (see ¶10 below); or

(vi) the excess of an annuity payment included in income under paragraph 56(1)(d) over its capital element as determined under paragraph 60(a); and

(b) amounts accrued on certain life insurance policies and annuities and included in income under section 12.2 or former paragraph 56(1)(d.1).

Actually, I never mentioned that it should be the minimum amount, but rather that the withdrawals need to be structured as regularly occuring withdrawals as opposed to lump sum withdrawals. The source of my information was a phone conversation with a tax officer at the CRA. They made it very clear that the withdrawals need to be structured like annuitized income (just like you would receive income from a pension) in order to be treated as such.

However, the CRA will be the first to tell you that the last word on any subject will be the interpretation of the ITA and any IT’s that are issued (Income Tax Act and Interpretation Bulletins respectively). (i.e. not ME and not the CCH tax book). I’ll see if I can dig up the section of the ITA or an IT that has it in print.

Thanks.