Open ProvincesRetiring Allowance: Special RRSP Transfer for Pre-1996 Service
A portion of some retiring allowances may qualify for a direct registered-plan transfer based on service before 1996, outside the employee’s regular RRSP deduction limit.
Some severance or other retiring allowances include an eligible portion that may be transferred to the former employee’s own registered plan under a special rule for service before 1996. This transfer can be separate from the person’s ordinary RRSP deduction limit, but it is not an automatic feature of every severance payment.
How the eligible amount is determined
The federal formula generally allows up to $2,000 for each year or part-year of qualifying service before 1996. An additional $1,500 per year or part-year before 1989 may apply when the employer pension or deferred profit-sharing plan conditions are met. Service from 1996 onward does not create this special transfer amount. Prior transfers and the employer-employee relationship can also affect the calculation.
Confirm the slip and destination
The eligible portion should be identified in the employer’s tax reporting, including the applicable T4 box. The special amount can generally be transferred only to the employee’s own eligible registered plan—not a spouse’s RRSP under this rule. Ask payroll for a written calculation and compare it with the CRA guidance before signing a transfer request.
Direct handling can avoid withholding on the transferred portion
Where the conditions are satisfied, the employer may transfer the eligible portion directly to the registered plan without withholding income tax on that amount. The portion that does not qualify is generally taxable income unless another valid transfer or deduction rule applies. Taking the whole payment in cash and trying to reconstruct the transfer later can create a different tax result.
The name used by an employer is not decisive. The payment must meet the tax definition of a retiring allowance, and the special service calculation is technical. Confirm the eligible amount with the employer, the CRA and a tax professional where the sums are significant.
Official guidance: CRA’s transfer of a retiring allowance and Income Tax Folio on retiring allowances. Version française →
Sources and limits
Official sources: Canada Revenue Agency, retiring-allowance transfer rules and Income Tax Folio S2-F1-C2, checked October 7, 2026. Eligibility depends on employment history, pension-plan vesting and employer reporting.
General information based on federal and national rules; provincial rules may differ. Confirm with the official body before acting.