# Pension Contribution through RRSP?



## amitdi (May 31, 2012)

Hi,
I had a question for which I could not get satisfactory answer through googling. So thought of posting in my faviourite forum.

My company deducts between 1-6% of my salary (based on my choice) towards Pension contribution. My question is
- Is that contribution through RRSP? I dont think so
- Can I ask my company to make my pension contributions as RRSP deductions? Afterall, pension contribution is nothing but an investment in some fund managed by a trust.

Any information on this and more would be highly appreciated. Thank you.


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## stardancer (Apr 26, 2009)

amitdi said:


> Hi,
> I had a question for which I could not get satisfactory answer through googling. So thought of posting in my faviourite forum.
> 
> My company deducts between 1-6% of my salary (based on my choice) towards Pension contribution. My question is
> ...


Whether it is a defined benefit or defined contribution plan, you are winning if they match your contributions. Look at it as a savings account until you change jobs.

You can still open up your own RRSP at an institution of your choice. You just have to watch the contribution room each year which is shown on your Notice of Assessment.


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## the-royal-mail (Dec 11, 2009)

It all comes out of your pensionable earnings amount as shown on your notice of assessement. I think it's around 18% of your income and the total of your RRSPs and pensions must not exceed this number. It's up to you to watch and monitor these amounts carefully if you are contributing to more than one retirement savings vehicle.


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## GoldStone (Mar 6, 2011)

Pension contribution reduces your taxable income in the current year, the same way RRSP does (resulting in tax refund). However, it does not count towards your RRSP room in the current year. Instead, it results in Pension Adjustment that reduces your RRSP room the next year. This will be shown on your Notice of Assesment.


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## amitdi (May 31, 2012)

GoldStone said:


> Pension contribution reduces your taxable income in the current year, the same way RRSP does (resulting in tax refund). However, it does not count towards your RRSP room in the current year. Instead, it results in Pension Adjustment that reduces your RRSP room the next year. This will be shown on your Notice of Assesment.


Thank you.


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## Eclectic12 (Oct 20, 2010)

GoldStone said:


> Pension contribution reduces your taxable income in the current year, the same way RRSP does (resulting in tax refund). However, it does not count towards your RRSP room in the current year...


This is good ... though it's probably best to point out that if the pension is a Defined Benefit (DB) one, the Pension Adjustment (PA) will be much higher than dollar for dollar.

For example, the Defined Contribution (DC) pension I was offered meant that $1 came from the employer, $1 from me where the PA was $2. The DB pension was $2.75 from the employer and $1.25 from me where the PA was $11.


With the employee contribution potentially being as low as $1 (and far fewer DB pensions still available/running) - I'd bet on it being a DC pension but I've seen stranger things posted.


Cheers


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## GoldStone (Mar 6, 2011)

Eclectic12 said:


> This is good ... though it's probably best to point out that if the pension is a Defined Benefit (DB) one, the Pension Adjustment (PA) will be much higher than dollar for dollar.


Good to know. Thanks. I've never had a DB pension. My DC plan matches 1 for 1, so Pension Adjustment = Pension Contribution x 2.

Note to OP:

T4 shows pension contribution in box 20; Pension Adjustment in box 52. You have to report them on T1. Lines 207 and 206 respectively.


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## Eclectic12 (Oct 20, 2010)

^^^^^

It was funny as a couple of co-workers at two different companies with DB plans were upset at the multiplier of the DB plan hitting their RRSP contribution "too hard". They both wanted to switch to a DC plan so that they had more RRSP room.

After calculating what an 8% market gain x number of years to retirement would get them in their RRSP (including having more room) and comparing to the DB plan - they changed their minds. As I recall, the one calculated his RRSP would be out of money in 6.3 years.


Cheers


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## amitdi (May 31, 2012)

GoldStone said:


> Good to know. Thanks. I've never had a DB pension. My DC plan matches 1 for 1, so Pension Adjustment = Pension Contribution x 2.
> 
> Note to OP:
> 
> T4 shows pension contribution in box 20; Pension Adjustment in box 52. You have to report them on T1. Lines 207 and 206 respectively.



Thanks, I got the answer for my questions. And my company matches 1:1 and I have a DC plan. I have been contributing 1% for the past 6 months I have been here. But I think I should make that 6% because company's contribution is really free money. Currently, I can afford to save more as I need very less of my salary for my living.

Any flaw with my thinking?


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## sharbit (Apr 26, 2012)

You may also want to check on the CRA website. If you have a login you can check how much RRSP contribution room you have left over. Chances are every year theres a little left over. If you have a DB plan and want to also do RRSP's be careful, it's still your job to make sure you don't go over.


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## Spudd (Oct 11, 2011)

No flaw at all with your thinking. You should definitely take the free money.


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## GoldStone (Mar 6, 2011)

amitdi said:


> Any flaw with my thinking?


No, it's flawless. Contribute the maximum that the company is willing to match.

BTW, 6% + 6% leaves you with another 6% in RRSP contribution room that you can contribute to a self-directed plan.


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