Your pension and RRSPs

Your pension & your RRSP room

You’re probably aware that the federal government limits how much you can contribute to RRSPs each calendar year. What you might not know is that contributing to the PSPP affects how much RRSP room you have.

To ensure that people with work pension plans don’t have an unfair advantage when it comes to tax-sheltered retirement savings, the government introduced something called a pension adjustment (PA). A pension adjustment is an adjustment to your RRSP contribution room that is based on the estimated value of the pension you earn in a calendar year.

Your employer will report your PA every year on your T4.

How does it work?

Because you are contributing to the PSPP, a registered pension plan, the value of the PA will reduce your RRSP contribution room in the next calendar year. For example, if your PA was $5,000 for 2023, your 2024 RRSP contribution room will reduce by that same amount.

Why is it important?

The PA is important for you to understand because it reduces the amount that you may contribute to an RRSP.