Why Did My RRSP Room Change? Pension Adjustments Explained (Canada)

If your RRSP room is smaller than you expected, or dropped from one year to the next, the cause is usually a pension adjustment in box 52 of your T4. This page explains the pension adjustment and the other entries that move your room: the past service pension adjustment, the pension adjustment reversal, spousal contributions and reassessments. It also shows how to check CRA’s figure. For the formula and a calculator, see the RRSP contribution room calculator; for every other RRSP topic, see the RRSP and RRIF guide directory.

Why the pension adjustment exists

RRSP room is 18% of prior-year earned income, up to an annual dollar cap. Without the PA, a pension member could build a pension through work and shelter the full 18% in an RRSP. The PA reduces next year’s RRSP room by the value CRA assigns to the pension benefit earned this year, so total tax-sheltered saving is roughly the same with or without a pension.

• A PA comes from membership in a registered pension plan (RPP) or a deferred profit sharing plan (DPSP).
• It reduces your RRSP deduction limit for the following year.
• Your PA is in box 52 of your T4 (or box 034 of a T4A).
• A PA can be zero but never negative.
• A pension adjustment reversal (PAR) adds room back when you leave a plan.

New RRSP room = the lesser of (18% × prior-year earned income) and the dollar limit, minus the PA

PA formula for defined contribution (DC) pensions

For DC (money purchase) plans, the PA is simply the total contributed:

PA = employer contributions + employee contributions

Example: salary $90,000, employee contribution 5% ($4,500), employer match 5% ($4,500). PA = $9,000, and next year’s RRSP room is reduced by that amount.

PA formula for defined benefit (DB) pensions

DB plans value the future pension earned this year rather than the contributions:

PA = (9 × pension benefit earned in the year) − $600

The factor of 9 approximates the lump-sum value of each dollar of annual lifetime pension. The $600 offset applies only to the DB formula.

Example: a 2% accrual plan and a $95,000 salary earn a pension of $1,900 a year for this year’s service. PA = (9 × $1,900) − $600 = $16,500. Because of the 9× factor, DB plan members often have little RRSP room left.

PA for DPSPs

Employer contributions to a deferred profit sharing plan also create a PA. As with DC plans there is no $600 offset: the PA is the employer’s contribution for the year, plus any reallocated forfeitures. The DPSP guide covers vesting and withdrawals.

How much room typically remains

(The DB rows use 9 × 2% of salary, minus $600; plans with a lower accrual rate or an integrated CPP formula produce smaller PAs.)

Past service pension adjustment (PSPA)

A PSPA arises when your pension for earlier years becomes more valuable: your employer upgrades the benefit formula retroactively, or you buy back past service. The plan administrator reports the PSPA, and CRA subtracts it from your RRSP room. Unlike a yearly PA, a PSPA can reduce room you had already accumulated, so a large one can wipe out a significant part of your carried-forward room.

Pension adjustment reversal (PAR): getting room back

If you leave a plan and the benefit you take with you is worth less than the PAs reported while you were a member, the plan issues a PAR on a T10 slip and CRA adds it back to your RRSP room.

CRA adds a PAR to your RRSP room for the year your membership ended; like other unused room, it carries forward if you don’t use it right away.

Other reasons your room changed

A contribution above your room is a different problem: see the RRSP over-contribution guide. Room you never used stays available, as explained in unused RRSP room explained.

Checking that CRA’s figure is right

CRA can make errors. To check:

1. Log in to CRA My Account and open the RRSP section to see your deduction limit.
2. Cross-check: last year’s unused room + 18% of earned income (to the cap) − PA − any PSPA + any PAR − contributions deducted.
3. If your figure differs, call CRA at 1-800-959-8281 and ask which earned income and PA amounts they used.

Things to look for: prior-year contributions not yet reflected (common after a late filing), a PA reported twice (for example, after an employer changed payroll providers), and an earned-income figure that differs from your T4 (relevant for commissioned and self-employed people). If CRA used the wrong income, you can ask for a reassessment of the prior-year return.

Pension first, or RRSP?

A DC match is part of your pay, and it reduces RRSP room by the amount contributed. A TFSA is not affected by the PA at all. The broader trade-off between a workplace plan and your own RRSP is covered in should I contribute to a DCPP or RRSP? and, for DB members, pension vs RRSP.

Related articles

• RRSP contribution limit by year
• Group RRSP vs DPSP
• Retirement pensions guides