In general, there are no penalties when transferring between your retirement accounts. You can take money from an investment account (such as you or your spouse or common-law partner’s registered pension plan) and move it to your Registered Retirement Savings Plan (RRSP), all you need is Form T2151 and knowledge about how to use it. Here’s what you need to know about this form, when it might be advantageous for you to use it, and how to fill it out.
What is Form T2151 Direct Transfer of a Single Amount?
The Direct Transfer of a Single Amount form, T2151, allows you to take one lump sum from one of your investment accounts and place it into another. This form allows you to take from either a deferred profit-sharing plan (DPSP) or a registered pension plan (RPP). You may leave the account open after the transfer, or you may transfer all of the pension income from it into another account. Typically, there are no fees when you perform such a transfer and it should be done on a tax-deferred basis, which means that you will still pay the taxes on this money when you collect your benefit.
There are several options for the type of account you can transfer your money to, including:
- Registered Retirement Savings Plan (RRSP)
- Registered Retirement Income Fund (RRIF)
- Deferred Profit-Sharing Plan (DPSP)
- Registered Pension Plan (RPP)
- Specified Pension Plan (SPP)
Money that you transfer to these types of accounts typically do not affect your deduction limit on the account. However, in certain circumstances, you may need to claim some of this transferred amount as income and then claim an offsetting deduction.
When Should I Use Form T2151 Direct Transfer of a Single Amount?
This ability to transfer money from one savings plan to another can be highly beneficial for individuals and couples. For example before retirement, if you have multiple retirement plans it can be beneficial to consolidate them. Transferring to an RRSP does not affect your contribution limit for deduction purposes that year. However, these transfers are not allowed if you are older than 71 that year.
Transferring as an individual may get you some benefits, including:
- Simpler money management when you have fewer accounts
- Get lower frees from a new financial institution
- Other benefits of a new financial institution, like better financial advice
There are other circumstances where you may need to transfer your pension money. For example, you may need to transfer your pension plan amounts to a new retirement savings account if you have left a job and gained a new employer with their own plan offerings.
You and your spouse or common-law partner may have mutual funds in a savings plan or pension account and transferring between they may be beneficial, or even required. For example, if your spouse has passed on, you can transfer the entire amount of their registered pension plan. In this case, you must check off the box to indicate the death of a member of the registered pension plan.
Upon the divorce of a couple, one may need to transfer their portion of the registered pension account into one of their own accounts. However, you speak to an expert to determine how you are affecting your RRSP deduction, limits, and benefit amount by making this transfer.
How to Fill Out Form T12151 Direct Transfer of a Single Amount
This form is simple to get from the CRA website or from your tax software. However, it is an unusual form to fill out, as you do not send it directly to the Canada Revenue Agency. To start, you will need all documentation on both accounts that was provided by your past and current employer.
You will need the number and name of the account you are withdrawing from and adding to. You will need the exact amount you are transferring unless you are transferring all of the funds in the account.
The form must be given to your pension plan administrator. All four pages are identical and must be sent, which means you need to fill out all four.
The financial institution that holds your RRSP will receive a copy of this form from the transferring institution, so you do not need to worry about alerting them unless they otherwise require you to.
Then, once you make the physical transfer of your money from one account to the other, the process is complete. You should check with the receiving financial institution to be sure they received the money.