Purpose: Tax planning. Sometimes there may be tax advantage to withdraw a specific portion of a pension account. Or, bonus, to withdraw ‘periodic pension payments’ as defined by double tax treaties.

Use case: Someone seeks to actively transfer assets from deferred-tax to taxable, or if someone seeks to change tax residency to a jurisdiction that has offers tax incentive legislation for a limited number of years.

Definition: ‘periodic pension payments’ is a common term in double taxation treaties. It typically is computed as the greater of a) 10% of the pension account at 31 December of prior year, b) two times the legislative required minimum withdrawal amount.

Example: Jimmy is 55 year old Canadian tax resident with $5,000,000 defined contribution pension account (lucky Jimmy!). He determines that pension account is higher than they need to cover expenses and seeks to actively transfer pension asset to taxable asset. For various possible tax reasons, Jimmy may seek to withdraw pension income as a fixed percentage (e.g. 10% of prior year-end amount) annually, for a number of years. Alternatively, Jimmy may seek to withdraw pension income amount as ‘periodic pension payments’ (as defined per the ‘pensions & annuities income’ section of various Canadian double tax treaties)