Pension Adjustment (PA)
If you belong to a Registered Pension Plan (RPP) or Deferred Profit Sharing Plan (DPSP) through your employer, your employer reports a Pension Adjustment (PA) on your T4 slip. The PA reduces your RRSP contribution room for the following year to prevent "double-dipping" — getting both employer pension benefits and RRSP tax sheltering on the same income.
The PA represents the value of the pension benefit you earned during the year. For defined contribution plans, it equals the total contributions (employee + employer). For defined benefit plans, it's calculated using a formula based on the benefit you accrued. The PA appears in Box 52 of your T4.
If you leave an employer with a pension plan and receive a Past Service Pension Adjustment (PSPA) or Pension Adjustment Reversal (PAR), these can further affect your RRSP room. You can always check your current available RRSP room on your NOA or through CRA My Account.
How it works
The way your PA is calculated depends on your plan type. For a defined contribution plan, the PA simply equals the total dollars contributed by you and your employer combined. For a defined benefit plan, it's calculated using a formula tied to the pension benefit you accrued during the year, which is more complex and doesn't map directly to any dollar amount actually set aside on your behalf.
If you leave an employer with a defined benefit pension before your benefits fully vest, a Pension Adjustment Reversal (PAR) can restore RRSP room that was previously reduced by an inflated PA, since you didn't end up receiving the full accrued benefit the PA assumed. Buying back past service instead triggers a Past Service Pension Adjustment (PSPA), which further reduces your RRSP room to reflect the extra benefit you're purchasing.
Because the PA reduces next year's RRSP room rather than the current year's, pension plan members typically have noticeably less available RRSP room than a colleague earning the same salary without a workplace pension — this is intentional, since it keeps the combined value of pension and RRSP tax sheltering roughly equal across employees. Always check your NOA or CRA My Account for your actual room rather than assuming the flat 18% figure applies.
Example: Pension Adjustment on a defined contribution plan
You contribute $3,000 to your workplace defined contribution pension plan during the year, and your employer matches with another $3,000. Your Pension Adjustment for the year is $6,000 — the sum of both contributions — and it appears in Box 52 of your T4.
That $6,000 PA reduces your RRSP contribution room for next year by $6,000, on top of the normal 18%-of-earned-income calculation, since the CRA treats the pension contributions as having already used up an equivalent amount of your overall retirement-savings tax shelter.
Frequently asked questions
Does a Pension Adjustment reduce this year's RRSP room or next year's?
Next year's — the PA reported on this year's T4 reduces the RRSP contribution room you'll have available in the following tax year, not the room you already have now.
What's the difference between a PSPA and a PAR?
A PSPA further reduces your RRSP room when you buy back past pension service, while a PAR restores RRSP room that was previously reduced if you leave a defined benefit plan before your benefits fully vest.
Where can I find my Pension Adjustment amount?
It's reported in Box 52 of your T4 slip, and its effect on your RRSP deduction limit is summarized on your Notice of Assessment or in CRA My Account.
Related Terms
RRSP (Registered Retirement Savings Plan)
An RRSP is a government-registered account where contributions are tax-deductible and investments grow tax-free until withdrawal.
T4 (Statement of Remuneration Paid)
The T4 slip is issued by employers to employees by the last day of February each year.
NOA (Notice of Assessment)
After you file your T1 return, the CRA sends a Notice of Assessment confirming the details — your total income, deductions, tax credits, and resulting tax payable or refund.