Pension buybacks allow eligible Canadians to purchase years of service for periods when they were not participating in their employer’s pension plan.
Advantages and disadvantages of a pension buyback
There are some things to consider when deciding if participating in a pension buyback service is right for you.
- The opportunity for increased pension income at retirement, or the potential to retire earlier.
- A fixed income stream during retirement, with less longevity risk.
- The potential for increased creditor protection if you have a registered pension plan (RPP)
- The potential opportunity for a tax deduction depends on how the buyback is funded.
- May reduce your RRSP contribution room.
- Limited access to the pension funds in case of an emergency (compared to RRSP funds that are eligible for withdrawal).
- Limited estate planning options.
- The contributed capital may perform differently within the pension fund compared to the increased income stream from the pension buyback.
Since the cost of a pension buyback is specific to each person, it is best to contact your pension provider directly. They will also be able to provide specifics regarding tax implications.
Request a pension buyback with Wealthsimple
To request a pension buyback, contact our support team. They will need the following to assist with your request:
A T2033 form that has been filled out and signed by you and your pension provider.
In some cases, your pension provider will provide you with a pension buyback invoice that contains the same information as a T2033.
- A locked-in agreement from your pension provider
This is only if the funds are coming from a LIRA account.
Once the paperwork has been received by our support team, our back office will review the documents and issue a cheque to your pension provider.
Buyback deadlines are specific to each person. We recommend that you get in touch with your pension provider, or refer to the provided documents for more information on your deadline.