Is CPP/QPP or pension income splitting worthwhile?
Income splitting is almost always beneficial, particularly in cases where one spouse has significantly higher income at retirement. CPP pension income may be split between spouses, but this requires the annuitant to complete an application with CPP and the monthly pension amount is actually shared between spouses. There are also income splitting provisions available to pensioners under the Income Tax Act (ITA). Using these provisions, you are required to decide on an annual basis when you file your tax return, and only certain types of income are eligible (CPP and OAS are excluded). The primary difference between the two approaches is that under the provisions of the ITA, there is no change to the pension that you or your spouse actually receive, but the advantage is obtained through lower marginal tax rates, and therefore through overall tax savings.
