What's a Pension Adjustment?

The pension adjustment is the amount of pension benefit that you have accrued in your pension plan in the preceding year. It is used in determining your RRSP contribution limit if you belong to a pension plan.

The purpose of a pension adjustment is to treat everyone equally. Whether you’re in a pension plan or not the allowed amount to go into a registered plan should be the same. People in pension plans just have the advantage of their employer depositing some of the money. 

For Defined Benefit (DB) Pension Plans Members

If you are a member of a defined benefit (DB) pension plan, you may contribute up to a maximum of 18% of your previous year's “earned income” minus your pension adjustment. The pension adjustment appears in Box 52 of your previous year's T4 slip.

Your pension adjustment includes the minimum $600 RRSP contribution limit to which defined benefit plan members are entitled unless your earned income is too low to qualify. You can calculate your pension adjustment using the formula:

Pension adjustment = 9 x pension benefit accrued – $600

For Defined Contribution (DC) or Money Purchase Pension Plan Members

If you are a member of a money purchase plan or a defined contribution (DC) pension plan, the total of all employer and employee contributions in the previous year equals the current year’s PA. You may contribute 18% of your previous year's “earned income” up to the annual maximum limit less your previous year's pension adjustment.

You may wish to check your notice of assessment for your previous year's income tax and benefit return to give you the amount that Canada Revenue Agency has calculated as your maximum contribution limit.

Remember, if your pension contributions are calculated only on base pay, your pension adjustment will only reflect that amount. For example:

Base salary in previous year:  


18% x $70,000                                                            =


Less Pension Adjustment (PA) from previous year:

10%* x $70,000                                                           =

($ 7,000)

Current year’s RRSP room                                         =

$   5,600

*Total pension plan contribution is assumed to be 10%, which could be employer and/or employee contributions.


If no PA applies to overtime or bonus income, (because it is not pension eligible), you can contribute a full 18% up to the annual maximum.

Bonus/overtime in previous year:


18% x $20,000                                                            =

$   3,600

Less Pension Adjustment (PA) from previous year:

($           0)

Additional RRSP room for current year                      =

$   3,600

Let’s assume that the current year’s pension contribution remains the same as the previous year's. Maximizing contributions into registered plans, would then be a total of:

$ 7,000 

(into pension)

+$ 5,600 

(into RRSP - remaining RRSP room from base pay)

+$ 3,600 

(into RRSP - additional RRSP room from bonus/overtime)


(maximum RRSP/pension contribution for the year)


Due to the fact that people who contribute regularly to an employer plan may not know the exact amount of their PA, there is a provision to not penalize anyone who has contributed up to $2,000 over their current year’s RRSP contribution room. The over-contribution is not deductible, but may be used against future eligible RRSP contribution room.

What's a Pension Adjustment?

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