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HOOPP
Members Life Changes Planning for Retirement Taxes and Your Pension

Taxes and your retirement income

You’ve worked hard for your pension. That’s why, before you retire, it’s important that you understand the impact of taxes on your retirement income.

Income from pension plans (e.g. HOOPP), CPP, OAS, RRSPs and RRIFs are taxable income. As such, HOOPP is required to deduct taxes from your pension payment. Deductions are based on basic federal and provincial income tax rules. Taxes are not automatically deducted from CPP and OAS pension payments, unless you make a request to Service Canada.   

Strategies to reduce taxes

You may be able to maximize your retirement income and pay less taxes by using two key strategies:

Income splitting between spouses

Married or common-law couples can benefit from the higher-earning spouse shifting up to 50% of their eligible pension income to the spouse who is in a lower tax bracket. This approach is particularly effective in cases where one spouse has significantly higher retirement income than the other. Your HOOPP pension is eligible for income splitting.

Tax credits

Tax credits are amounts that reduce the tax you pay on your taxable income.

An example of a tax credit you can claim with your HOOPP pension is the pension income amount. This credit can be claimed annually when you file your personal tax return or can be used to reduce the amount of taxes you pay upfront each month. You may be able to reduce the amount of taxes being deducted from your monthly pension payment by completing and sending HOOPP a federal TD1 (Personal Tax Credits Return) and your provincial TD1 form.

Either way, tax credits can reduce the amount of tax you pay each year. Keep in mind that depending on your total taxable income, if you claim the tax credit monthly, you may need to pay additional taxes when you file your tax return.

There may be other credits that can help to reduce your taxes in retirement, depending on your personal situation, such as the age amount tax credit, the disability tax credit, the Canada caregiver amount and the GST/HST credit.

When choosing a tax strategy, consider:

  • If you have a spouse, is there a difference between your tax brackets?
    If so, you should consider splitting your pension income with your spouse. By taking advantage of income splitting, the overall taxes that you pay as a couple may be less than the taxes paid by each person separately.
  • Do you prefer to pay your taxes upfront or get a refund?
    By applying the tax credits directly to your HOOPP pension, you could get a larger monthly pension payment (after taxes); but you may not get a tax refund or may owe additional taxes once you file your personal tax return. Or, you could wait until tax season to apply the credits to minimize the taxes owed or possibly receive a refund.
  • Do you have multiple sources of income?
    You can increase the amount of tax deducted from your monthly HOOPP pension by visiting HOOPP Connect. This way, you can avoid owing additional taxes at year end.

Already retired?

To learn more about your pension payments schedule, tax slips and other important information, please visit your life in retirement.

This document provides a simplified overview of HOOPP's benefits based on the terms of the HOOPP Plan Text at the time of publication. From time to time, HOOPP may amend the HOOPP Plan Text. In cases where the information provided in this document differs from that contained in the HOOPP Plan Text, the HOOPP Plan Text will govern. More details, including the full HOOPP Plan Text and a complete description of the Plan and its benefits, can be found on hoopp.com.