Sometimes it may be possible to create eligible pension income in order to take advantage of the pension tax credit or pension splitting.
Convert RRSPs to RRIFs in the Year you Turn 65
Purchase an Annuity with RRSP Funds
Canada Revenue Agency (CRA) Resources
Funds in RRSPs are required to be withdrawn (subject to tax) or converted to a RRIF (tax-free) by the end of the year in which the taxpayer turns 71.
Because withdrawals from a RRIF are eligible for the pension income tax credit for taxpayers over 65, it may be useful to convert at least a portion of RRSPs to a RRIF in the year in which the taxpayer turns 65. The amount converted should be sufficient to allow withdrawals of at least $2,000 per year for 7 years (age 65 to 71 inclusive), until all RRSPs must be converted to RRIFs. If there is a spouse, twice as much could be converted to take advantage of the pension splitting available. The spouse might also be able to take advantage of the pension tax credit, depending on his/her age.
Keep in mind that administration fees may be charged on a RRIF with a low balance.
Tax Tip: Ask your advisor about converting a portion of RRSPs into RRIFs at age 65 to take advantage of the pension income tax credit and pension splitting.
With interest rates fairly high in 2023, annuities may be worth a review.
Annuity payments from an RRSP qualify for the pension income tax credit for taxpayers 65 and over. An annuity will usually provide a lower rate of return than investments in securities in a self-directed RRSP, so a comparison should be done to determine which method provides the best after-tax return.
See Canada Revenue Agency Receiving income from an RRSP, which includes information on using RRSP funds to purchase an annuity.
Tax Tip: Compare your options carefully to get the best after-tax return.
RRIF calculator for calculating minimum withdrawals, fixed annual withdrawals adjusted for inflation, or withdrawals using a fixed number of years.
Revised: December 16, 2025