How to purchase an advanced life deferred annuity (ALDA)

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Overview

For more information about transferring funds to an ALDA, go to Chapter 9 – Advanced life deferred annuity (ALDA) transfers in Guide T4040, RRSPs and Other Registered Plans for Retirement.

Purchasing an ALDA

To purchase an ALDA, you must directly transfer a lump sum amount from one of the following registered plans:

Follow the instructions on page 2 of the form T2157 Direct Transfer from a Registered Plan to Purchase an ALDA and give it to your licensed annuity provider. 

Limits on transfers to purchase an ALDA

If you make a transfer to purchase an ALDA, either of the following purchases may result in an ALDA cumulative excess amount which is subject to tax:

ALDA cumulative excess amounts are subject to a tax of 1% per month for every month they are left in the ALDA at the end of the month.

If your ALDA purchases are subject to tax, you have to complete and file a T1-OVP-ALDA – Individual Tax Return for Excess Transfers to Purchase an ALDA return on or before the filing due date of your income tax and benefit return.

Example

John decides that he wants to purchase an ALDA in 2024. At the end of 2024, the fair market value (FMV) of his RRSP was $200,000, and the FMV of his RRIF was $500,000.

In February 2024, John transfers $50,000 from his RRSP directly to the ALDA. This is the maximum amount that he can transfer from his RRSP and not create an excess ALDA transfer. In September 2024, John wants to transfer more funds to his ALDA from his RRIF.

John thinks that he can transfer $125,000 from his RRIF as it will not create an excess ALDA transfer. However, John has forgotten that the lifetime ALDA dollar limit for 2024 is $170,000. As a result, John will only be permitted to transfer $110,000 from his RRIF to his ALDA.

What to do when you have an ALDA cumulative excess amount

If you have an ALDA cumulative excess amount at the end of any month for a particular year, you must file a T1-OVP-ALDA return for that year.

If you do not already have an ALDA cumulative excess amount at the start of a particular month and you make a transfer in that month that exceeds one of the ALDA transfer limits, you will not have to file a T1-OVP-ALDA return if the excess amount is refunded from the ALDA before the end of that month.

Tax tips

You can use the interactive T1-OVP-ALDA return to check if your purchases will result in an ALDA cumulative excess amount before you actually make your ALDA purchases.

Waiver or cancellation of tax

If you determined that you must pay a tax on your ALDA cumulative excess amount, you may ask in writing that we waive or cancel the tax if both of the following conditions are met:

Note

A waiver refers to the tax that is otherwise payable by a taxpayer for which relief is granted by the CRA before this amount is assessed or charged to the taxpayer. A cancellation refers to the amount of tax that was assessed or charged to the taxpayer for which relief is granted by the CRA.

To consider your request, we will need you to send a letter that explains:

Send your letter and supporting documents (such as copies of your ALDA account statements that identify the date you withdrew your cumulative excess amount as well as any other correspondence that shows that your cumulative excess amount arose due to a reasonable error) to:

Canada Revenue Agency
Sudbury Tax Centre
Pension Workflow Team
Post Office Box 20000, Station A
Sudbury ON P3A 5C1

For more information on cancellation or waiver of late-filing penalties and interest, go to Information Circular IC07-1R1, Taxpayer Relief Provisions.

Examples of the ALDA cumulative excess amounts

Example 1 – Excess ALDA transfer

On December 31, 2023, the taxpayer has a $200,000 balance in a RRIF with financial institution A (RRIF-A), and a $100,000 balance in a RRIF with financial institution B (RRIF-B).

Assume that apart from the transfers to an ALDA, there are no fluctuations in the value of the taxpayer’s registered plans for 2024.

The following transfers are made under a contract for an ALDA that the taxpayer has entered into with a licensed annuities provider:

  • April 15, 2024: $90,000 is transferred from RRIF-A.
  • April 16, 2024: $70,000 is transferred from RRIF-B.

In September 2024, the taxpayer becomes aware that they have an ALDA cumulative excess amount, and on September 26, 2024, $85,000 is refunded from the ALDA to the taxpayer.

Chart A – Calculating your excess ALDA transfers for 2024 and previous years

To determine if you have any excess ALDA transfers (amounts in excess of the 25% limit), enter the information about all of your ALDA purchases for 2024 and prior years in chronological order (first purchase in the first row, second purchase in the second row, etc.).

Example 1 chart A 2023
      A B C D E F G H
Enter the date of the ALDA purchase.
(YYYYMMDD)
Enter the type of plan the amount was transferred from (for example, RRSP, RRIF). Enter the plan number of the plan the amount was transferred from. Enter the amount transferred from the plan to purchase an ALDA on the purchase date. Enter the FMV of your account in the plan at the end of the year before the year of the ALDA transfer. Enter the total amount of all ALDA transfers made in previous years from this plan. Do not include any ALDA transfers made in the current year. Column B plus column C. Multiply column D by 25%. Enter the total amount of all previous ALDA transfers made from this plan, including any previous ALDA transfers made in the current year. Column E minus column F. 
If the result is negative, enter "0".
Column A minus column G.
If the result is negative, enter "0". This is the excess ALDA transfer.
2024-04-15 RRIF A00000001 90,000 200,000 0 200,000 50,000 0 50,000 40,000
2024-04-16 RRIF B00000002 70,000 100,000 0 100,000 25,000 0 25,000 45,000

Chart B – Calculating your ALDA cumulative excess amounts for 2024

Example 1 chart B 2023
  January February March April May June July August September October November December  
Enter the total amount of all of your ALDA transfers for all years up to the end of the month.       170,000
Footnote 1
170,000 170,000 170,000 170,000 170,000 170,000 170,000 170,000 1
The ALDA dollar limit for 2024. 170,000 170,000 170,000 170,000 170,000 170,000 170,000 170,000 170,000 170,000 170,000 170,000 2
Line 1 minus line 2. If the result is negative, enter "0".       0 0 0 0 0 0 0 0 0 3
Enter the total amount of all of your excess ALDA transfers from all years up to the end of the month. See Chart A.       85,000 85,000 85,000 85,000 85,000 85,000 85,000 85,000 85,000 4
Enter the greater of line 3 and line 4.       85,000 85,000 85,000 85,000 85,000 85,000 85,000 85,000 85,000 5
Enter the total amount of all of the refunds from your ALDA(s) from all years up to the end of the month.       0 0 0 0 0 85,000 85,000 85,000 85,000 6
Line 5 minus line 6. If the result is negative, enter "0". This is your ALDA cumulative excess amount for the month.       85,000 85,000 85,000 85,000 85,000 0 0 0 0 7
Add the amounts for all months from Line 7. Enter the total on line 1 of Step 2 on page 1.  425,000 8

Calculating the amount of tax you have to pay

Note: Before filling out this step, fill out Charts A and B.

Calculating the amount of tax you have to pay
Enter the amount from Line 8 in Chart B. This is the amount subject to tax. $425,000 1
Applicable rate. x        1% 2
Multiply line 1 by line 2. This is the tax on your ALDA cumulative excess amount, and your balance owing.     $4,250 3
Example 2 – Exceeding ALDA dollar limit

On December 31, 2023, a taxpayer has a $500,000 balance in a money purchase account under an RPP, and a $280,000 balance in a RRIF with financial institution B (RRIF-B).

Assume that apart from the ALDA transfers, there are no fluctuations in the value of the taxpayer’s registered plans for 2024.
The following transfers are made under a contract for an ALDA that the taxpayer has entered into with a licensed annuities provider:

  • April 15, 2024: $125,000 is transferred from MP RPP.
  • June 16, 2024: $70,000 is transferred from RRIF.

In September 2024, the taxpayer becomes aware that they have an ALDA cumulative excess amount, and on September 26, 2024, $35,000 is refunded from the ALDA to the taxpayer.

Chart A – Calculating your excess ALDA transfers for 2024 and previous years

To determine if you have any excess ALDA transfers (amounts in excess of the 25% limit), enter the information about all of your ALDA purchases for 2024 and prior years in chronological order (first purchase in the first row, second purchase in the second row, etc.).

Example 2 chart A 2023
      A B C D E F G H
Enter the date of the ALDA purchase.
YYYYMMDD
Enter the type of plan the amount was transferred from (for example, RRSP, RRIF). Enter the plan number of the plan the amount was transferred from. Enter the amount transferred from the plan to purchase an ALDA on the purchase date. Enter the FMV of your account in the plan at the end of the year before the year of the ALDA transfer. Enter the total amount of all ALDA transfers made in previous years from this plan. Do not include any ALDA transfers made in the current year. Column B plus column C. Multiply column D by 25%. Enter the total amount of all previous ALDA transfers made from this plan, including any previous ALDA transfers made in the current year. Column E minus column F. 
If the result is negative, enter "0".
Column A minus column G.
If the result is negative, enter "0". This is the excess ALDA transfer.
2024-04-15 MP RPP A00000001 125,000 500,000 0 500,000 125,000 0 125,000 0
2024-06-16 RRIF B00000002 70,000 280,000 0 280,000 70,000 0 70,000 0

Chart B – Calculating your ALDA cumulative excess amounts for 2024

Example 2 chart B 2023
  January February March April May June July August September October November December  
Enter the total amount of all of your ALDA transfers for all years up to the end of the month.       125,000 125,000 195,000
Footnote 2
195,000 195,000 195,000 195,000 195,000 195,000 1
The ALDA dollar limit for 2024. 170,000 170,000 170,000 170,000 170,000 170,000 170,000 170,000 170,000 170,000 170,000 170,000 2
Line 1 minus line 2. If the result is negative, enter "0".       0 0 25,000 25,000 25,000 25,000 25,000 25,000 25,000 3
Enter the total amount of all of your excess ALDA transfers from all years up to the end of the month. See Chart A.       0 0 0 0 0 0 0 0 0 4
Enter the greater of line 3 and line 4.       0 0 25,000 25,000 25,000 25,000 25,000 25,000 25,000 5
Enter the total amount of all of the refunds from your ALDA(s) from all years up to the end of the month.       0 0 0 0 0 25,000 25,000 25,000 25,000 6
Line 5 minus line 6. If the result is negative, enter "0". This is your ALDA cumulative excess amount for the month.       0 0 25,000 25,000 25,000 0 0 0 0 7
Add the amounts for all months from Line 7. Enter the total on line 1 of Step 2 on page 1.  75,000 8

Calculating the amount of tax you have to pay

Note: Before filling out this step, fill out Charts A and B.

Calculating the amount of tax you have to pay - Example 2
Enter the amount from Line 8 in Chart B. This is the amount subject to tax. $75,000 1
Applicable rate. x      1% 2
Multiply line 1 by line 2. This is the tax on your ALDA cumulative excess amount, and your balance owing.     $750 3
Example 3 – Exceeding limits over multiple years

Note

For this complex example, you will need to complete separate T1-OVP-ALDA returns for 2024 and 2025.

Chart A – Calculating your excess ALDA transfers for 2024 and previous years

To determine if you have any excess ALDA transfers (amounts in excess of the 25% limit), enter the information about all of your ALDA purchases for 2024 and prior years in chronological order (first purchase in the first row, second purchase in the second row, etc.).

Note

For this example, the ALDA dollar limit for 2024 and 2025 is $170,000.

Example 3 chart A 2022
      A B C D E F G H
Enter the date of the ALDA purchase.(YYYYMMDD) Enter the type of plan the amount was transferred from (for example, RRSP, RRIF). Enter the plan number of the plan the amount was transferred from. Enter the amount transferred from the plan to purchase an ALDA on the purchase date. Enter the FMV of your account in the plan at the end of the year before the year of the ALDA transfer. Enter the total amount of all ALDA transfers made in previous years from this plan. Do not include any ALDA transfers made in the current year. Column B plus column C. Multiply column D by 25%. Enter the total amount of all previous ALDA transfers made from this plan, including any previous ALDA transfers made in the current year. Column E minus column F. If the result is negative, enter "0". Column A minus column G. If the result is negative, enter "0". This is the excess ALDA transfer.
2024-04-15 RRIF A00000001 70,000 280,000 0 280,000 70,000 0 70,000 0
2024-04-16 RRIF B00000002 35,000 140,000 0 140,000 35,000 0 35,000 0
2024-07-20 RRIF A00000001 15,000 280,000 0 280,000 70,000 70,000 0 15,000
2024-08-03 RPP RPP0000003 60,000 500,000 0 500,000 125,000 0 125,000 0

Chart B – Calculating your ALDA cumulative excess amounts for 2024

Example 3 chart B 2022
  January February March April May June July August September October November December  
Enter the total amount of all of your ALDA transfers for all years up to the end of the month.       105,000
Footnote 3a
105,000 105,000 120,000
Footnote 3b
180,000
Footnote 3c
180,000 180,000 180,000 180,000 1
The ALDA dollar limit for 2024. 170,000 170,000 170,000 170,000 170,000 170,000 170,000 170,000 170,000 170,000 170,000 170,000 2
Line 1 minus line 2. If the result is negative, enter "0" 0 0 0 0 0 0 0 10,000 10,000 10,000 10,000 10,000 3
Enter the total amount of all of your excess ALDA transfers from all years up to the end of the month. See Chart A.             15,000 15,000 15,000 15,000 15,000 15,000 4
Enter the greater of line 3 and line 4. 0 0 0 0 0 0 15,000 10,000 10,000 10,000 10,000 10,000 5
Enter the total amount of all of the refunds from your ALDA(s) from all years up to the end of the month.                         6
Line 5 minus line 6. If the result is negative, enter "0" This is your ALDA cumulative excess amount for the month. 0 0 0 0 0 0 15,000 10,000 10,000 10,000 10,000 10,000 7
Add the amounts for all months from Line 7. Enter the total on line 1 of Step 2 on page 1.  65,000 8

Calculating the amount of tax you have to pay

Note: Before filling out this step, fill out Charts A and B.

Calculating the amount of tax you have to pay - Example 3
Enter the amount from Line 8 in Chart B for 2022. This is the amount subject to tax. $65,000.00 1
Applicable rate. x        1% 2
Multiply line 1 by line 2. This is the tax on your ALDA cumulative excess amount, and your balance owing.     $650.00 3

After completing calculation for prior year, complete calculation for the current year.

Chart A – Calculating your excess ALDA transfers for 2024 and previous years

To determine if you have any excess ALDA transfers (amounts in excess of the 25% limit), enter the information about all of your ALDA purchases for 2024 and prior years in chronological order (first purchase in the first row, second purchase in the second row, etc.).

Example 3 chart A 2023
      A B C D E F G H
Enter the date of the ALDA purchase.
(YYYYMMDD)
Enter the type of plan the amount was transferred from (for example, RRSP, RRIF). Enter the plan number of the plan the amount was transferred from. Enter the amount transferred from the plan to purchase an ALDA on the purchase date. Enter the FMV of your account in the plan at the end of the year before the year of the ALDA transfer. Enter the total amount of all ALDA transfers made in previous years from this plan. Do not include any ALDA transfers made in the current year. Column B plus column C. Multiply column D by 25%. Enter the total amount of all previous ALDA transfers made from this plan, including any previous ALDA transfers made in the current year. Column E minus column F. 
If the result is negative, enter "0".
Column A minus column G.
If the result is negative, enter "0". This is the excess ALDA transfer.
2023-04-15 RRIF A00000001 70,000 280,000 0 280,000 70,000 0 70,000 0
2023-04-16 RRIF B00000002 35,000 140,000 0 140,000 35,000 0 35,000 0
2023-07-20 RRIF A00000001 15,000 280,000 0 280,000 70,000 70,000 0 15,000
2023-08-03 RPP RPP0000003 60,000 500,000 0 500,000 125,000 0 125,000 0
2024-02-05 RRIF A00000001 45,000 195,000
Footnote 4
85,000 280,000 70,000 85,000
Footnote 4a
0 45,000

Chart B – Calculating your ALDA cumulative excess amounts for 2023

Example 3 chart B 2023
  January February March April May June July August September October November December  
Enter the total amount of all of your ALDA transfers for all years up to the end of the month. 180,000
Footnote 5a
225,000
Footnote 5b
225,000 225,000 225,000 225,000 225,000 225,000 225,000 225,000 225,000 225,000 1
The ALDA dollar limit for 2024. 170,000 170,000 170,000 170,000 170,000 170,000 170,000 170,000 170,000 170,000 170,000 170,000 2
Line 1 minus line 2. If the result is negative, enter "0". 10,000 55,000 55,000 55,000 55,000 55,000 55,000 55,000 55,000 55,000 55,000 55,000 3
Enter the total amount of all of your excess ALDA transfers from all years up to the end of the month. See Chart A. 15,000
Footnote 5c
60,000
Footnote 5d
60,000 60,000 60,000 60,000 60,000 60,000 60,000 60,000 60,000 60,000 4
Enter the greater of line 3 and line 4. 10,000 60,000 60,000 60,000 60,000 60,000 60,000 60,000 60,000 60,000 60,000 60,000 5
Enter the total amount of all of the refunds from your ALDA(s) from all years up to the end of the month.       60,000 60,000 60,000 60,000 60,000 60,000 60,000 60,000 60,000 6
Line 5 minus line 6. If the result is negative, enter "0". This is your ALDA cumulative excess amount for the month. 10,000 60,000 60,000 0 0 0 0 0 0 0 0 0 7
Add the amounts for all months from Line 7. Enter the total on line 1 of Step 2 on page 1.  130,000 8

Calculating the amount of tax you have to pay

Note: Before filling out this step, fill out Charts A and B.

Calculating the amount of tax you have to pay - Example 4
Enter the amount from Line 8 in Chart B for 2023. This is the amount subject to tax. $130,000.00 1
Applicable rate. x        1% 2
Multiply line 1 by line 2. This is the tax on your ALDA cumulative excess amount, and your balance owing.     $1,300.00 3

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