# DC Pension vs RRSP



## Top_Spin (Apr 25, 2011)

Hi There

I'm having some trouble finding any material on if its more beneficial for me to have one or the other when I retire. 

I have the option of a DC where the company will match my contributions up to 4%. I'm in a pretty high tax bracket so I'll get back roughly 46% back as a result of contributing to my RRSP. Strictly number wise, the pension contribution will get slightly more... But if there are other benefits at retirement from a tax perspective or availability of funds then it might be a good idea to over look the 4% difference...

Would appreciate any references or thoughts...

Thanks


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## GoldStone (Mar 6, 2011)

Contribute 4% to DC Plan to capture the company match. Contribute the rest to the RRSP.

DC Plan is similar to a group RRSP. Read this recent thread to understand the differences:

http://canadianmoneyforum.com/showthread.php/13382-DCPP-vs-GRSP

Company match is free money. Never ever decline it.


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## GoldStone (Mar 6, 2011)

By the way:

Check management fees in the DC Plan. They can be very competitive, if you work for a large employer.


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## GoldStone (Mar 6, 2011)

BTW2:



Top_Spin said:


> I'm in a pretty high tax bracket so I'll get back roughly 46% back as a result of contributing to my RRSP.


Your DC contribution will reduce your taxable income the same way, resulting in the same refund.


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## Top_Spin (Apr 25, 2011)

Thanks Goldstone. That is helpful. For the reduction does it reduce my taxable income on my contribution or both mine and the employers? If its the latter then it seems like that is a clear winner.


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## GoldStone (Mar 6, 2011)

Your contribution only. Employer's pension contribution is not included in your taxable income, so you can't deduct it.


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## Rob79 (Feb 16, 2011)

I have looked into this many times as I am also in a matched DC plan. After I looked at all my options and checked how the historical returns were on my plan as well as the MER of 0.25% it was a pretty easy decision. I top up to the max of my allowed 18%, anything over the matched 7% is looked as non-locked in funds so if I do leave, I can always transfer this to an RSP or leave in the plan. Hope this helped


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## My Own Advisor (Sep 24, 2012)

Definitely take the company money!


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## cardhu (May 26, 2009)

Top Spin said:


> I'm having some trouble finding any material on if its more beneficial for me to have one or the other when I retire.


The key differences during accumulation years are (1) that a DCP is locked in, while an RRSP is not , and (2) unused RRSP deductions can be carried forward into the future, while DCP deductions (I think) cannot ... in both cases, they must eventually be converted to an income-delivering vehicle.

The key difference during retirement is that a RRIF has minimum withdrawals only, and no maturity, while a LIF or LRIF (depending on whether your DCP is federal or provincial, and if the latter, depending on which province you’re in) typically have both minimum *and* maximum withdrawals each year, and may in some cases have a mandatory maturity date, at which the remaining balance must be converted to an annuity.

Therefore, you have more flexibility with a RRSP/RRIF, to use it for purposes other than retirement income ... ie, you can fully collapse your RRSP/RRIF, any time you want, to buy that 46’ yacht you’ve had your eyes on ... but you cannot do that with a DCP/LIF.

Practically speaking, if you have other funds available to buy the yacht, and your intention for these funds is to generate retirement income anyway, then these distinctions may not be enough to influence your decision ... in which case, if your employer is matching your DCP contributions, but not RRSP contributions, then it’s a no-brainer, go for the match and then divert the remainder to RRSP.



Rob79 said:


> I top up to the max of my allowed 18%, anything over the matched 7% is looked as non-locked in funds


Are your additional voluntary top-ups going into the DCP, or into a separate parallel account? ... just curious ... One thing to consider, versus using a separate RRSP for your top up amounts, is that RRSP deductions can be carried forward into later years, if you so choose, while DCP deductions (I think) cannot. That flexibility may or may not have value to you.


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## Rob79 (Feb 16, 2011)

cardhu said:


> Are your additional voluntary top-ups going into the DCP, or into a separate parallel account? ... just curious ... One thing to consider, versus using a separate RRSP for your top up amounts, is that RRSP deductions can be carried forward into later years, if you so choose, while DCP deductions (I think) cannot. That flexibility may or may not have value to you.


My additional top-ups go into the DCP but into a non-locked in funds portion that gives me options down the road. But yes you are correct in the advantages RSP's have but in my case it does not help me. I also looked into diversifying and that is what I use my TFSA for.


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