How to purchase an advanced life deferred annuity (ALDA)
Disclaimer
We do not guarantee the accuracy of this copy of the CRA website.
Scraped Page Content
How to purchase an advanced life deferred annuity (ALDA)
On this page
Overview
- Effective January 1, 2020, the tax rules were amended to permit an ALDA to be a qualifying annuity purchase from certain registered plans. An ALDA is a life annuity where the annuity payment must be started before the end of the year in which you turn 85 years of age.
- An ALDA is a contract for a life annuity that must be issued by a licensed annuities provider.
- An ALDA is payable for as long as you live, or if it is a joint-lives annuity, for as long as you or your spouse or common-law partner lives.
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:
- registered retirement savings plan (RRSP)
- registered retirement income fund (RRIF)
- deferred profit sharing plan (DPSP)
- pooled registered pension plan (PRPP)
- money purchase registered pension plan (MP RPP)
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:
- A purchase that results in an excess ALDA transfer (informally referred to as an amount in excess of the 25% limit). Go to Chart A of the T1-OVP-ALDA – Individual Tax Return for Excess Transfers to Purchase an ALDA return to determine these amounts.
- A purchase that causes you to exceed the ALDA dollar limit for the current year (the lifetime maximum for all of your ALDA purchases). For the latest ALDA dollar limit amount, go to MP, DB, RRSP, DPSP, ALDA, TFSA limits and the YMPE.
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:
- your cumulative excess amount on which the tax is based arose due to a reasonable error; and
- you are taking, or have taken, reasonable steps to eliminate the cumulative excess amount
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:
- why you made the cumulative excess amount and why this is a reasonable error; and
- what steps you are taking, or have taken, to eliminate the cumulative excess amount
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
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: $80,000 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, $95,000 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.).
| 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 | 80,000 | 100,000 | 0 | 100,000 | 25,000 | 0 | 25,000 | 55,000 |
Chart B – Calculating your ALDA cumulative excess amounts for 2024
| 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. | 95,000 | 95,000 | 95,000 | 95,000 | 95,000 | 95,000 | 95,000 | 95,000 | 95,000 | 4 | |||
| Enter the greater of line 3 and line 4. | 95,000 | 95,000 | 95,000 | 95,000 | 95,000 | 95,000 | 95,000 | 95,000 | 95,000 | 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 | 95,000 | 95,000 | 95,000 | 95,000 | 6 | |||
| Line 5 minus line 6. If the result is negative, enter "0". This is your ALDA cumulative excess amount for the month. | 95,000 | 95,000 | 95,000 | 95,000 | 95,000 | 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. | 475,000 | 8 | |||||||||||
Calculating the amount of tax you have to pay
Note: Before filling out this step, fill out Charts A and B.
| Enter the amount from Line 8 in Chart B. This is the amount subject to tax. | $475,000 | 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. | $4,750 | 3 |
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, $25,000 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.).
| 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
| 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.
| 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 |
On December 31, 2023, the taxpayer has a $500,000 balance in a money purchase registered pension plan (MP RPP), and a $280,000 balance in a RRIF with financial institution A (RRIF-A), and a $140,000 balance in an 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 and 2025.
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: $70,000 is transferred from RRIF-A.
- April 16, 2024: $35,000 is transferred from RRIF-B.
- July 20, 2024: $15,000 is transferred from RRIF-A.
- August 3, 2024: $60,000 is transferred from MP RPP.
- February 5, 2025: $45,000 is transferred from RRIF-A.
In April 2025, the taxpayer becomes aware that they have a ALDA cumulative excess amount, and on April 26, 2025, $65,000 is refunded from the ALDA to the taxpayer.
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.
| 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
| 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 | |||||||||||
- Footnote 3a
-
$70,000 + $35,000
- Footnote 3b
-
$70,000 + $35,000 + $15,000
- Footnote 3c
-
$70,000 + $35,000 + $15,000 + $60,000
Calculating the amount of tax you have to pay
Note: Before filling out this step, fill out Charts A and B.
| 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.).
| 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
| 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 | |||||||||||
- Footnote 4
-
$280,000 – $70,000 – $15,000
- Footnote 4a
-
$70,000 + $15,000
- Footnote 5a
-
$70,000 + $35,000 + $15,000 + $60,000 from prior year
- Footnote 5b
-
$70,000 + $35,000 + $15,000 + $60,000 + $45,000
- Footnote 5c
-
$15,000 from prior year
- Footnote 5d
-
$15,000 + $45,000
Calculating the amount of tax you have to pay
Note: Before filling out this step, fill out Charts A and B.
| 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 |
Forms and publications
Page details
- Date modified:
- 2024-08-06