If you’re fortunate to have an employer willing to help you save for retirement, it helps to understand how a Registered Pension Plan (RPP) works. This savings plan isn’t just a place to park your money — it’s an investment tool with valuable tax advantages.
What is a registered pension plan?
An RPP is an employer-sponsored savings plan registered with the Canada Revenue Agency (CRA) that helps employees save for retirement. Employers contribute to the plan during the employee's working years, and depending on how the employer sets up the plan, employees may contribute as well. At retirement, the plan provides income: a defined benefit plan pays a set monthly pension, while a defined contribution plan's savings are converted into retirement income, for example through a life annuity or a locked-in income fund (LIF).
To open an RPP, the employer establishes the plan with a licensed provider such as a financial institution or insurance company. The employer has significant control here, since they choose the provider and decide how the money is invested. As the employee, you’re along for the ride and the gains.
Because employer contributions are mandatory in an RPP, your employer adds money to your plan on your behalf. Some employers also match the contributions you make, which effectively provides a 100% return on the amount you put in.
Types of registered pension plans
RPPs come in two types: defined benefit RPPs and money purchase RPPs.
Defined benefit plans set out a specific pension the retiree will receive and adjust contributions to match.
Defined contribution plans (also called money purchase plans) let employees and employers contribute without setting a fixed pension amount.
Both types of RPP are subject to CRA limits — defined contribution plans have an annual dollar contribution limit, while defined benefit plans are capped by a maximum annual pension benefit rather than a contribution amount. These plans may be structured so the employee contributes with an employer match (called “contributory”), or so only the employer contributes (“non-contributory”).
Most RPPs are subject to legislative standards regarding how they’re managed. These standards are mandated by both the federal government and provincial governments. These rules exist to protect members' retirement savings through funding requirements, vesting rules, and locking-in provisions that keep the money set aside for retirement.
RPPs offer two main tax advantages:
Tax-deductible contributions: you don’t pay tax on the money you contribute, which leaves more in your retirement account. Thanks to compound interest, more money today can mean significantly more in the future.
Tax-deferred growth: you only pay tax when you withdraw funds. Because your income is typically lower in retirement than in your peak working years, withdrawing later often means a lower tax rate.
How RPPs work
If you work full-time for a company that offers an RPP, ask your employer or human resources department how to participate. They can help you set up an account with the provider that handles the company’s RPPs.
If you have a defined benefit plan, your contributions and your employer’s contributions pool in the pension fund to be invested. When you retire, your employer is responsible for ensuring you are paid according to the promised payout.
If you have a defined contribution plan, you have your own account holding your contributions and your employer’s contributions. The account is invested. You usually have some options here, and how much you receive at retirement is based on how your investments perform.
Who manages the RPP?
The provider your employer works with manages the plan. That institution can work with a number of in-house and third-party administrators, trust companies, investment managers, and consultants.
What if you leave your employer?
In most provinces, the law says plan members are immediately vested. This means you’re entitled to the benefits of your own contributions and your employer’s contributions. You can’t lose any of it.
However, some provinces lack this law. Your employer may require you to work there, or be a member of the plan, for a set period before you become vested. If you leave before then, you’ll keep your own contributions but lose the portion your employer contributed.
When you leave your employer, you have a few options to manage your vested pension assets:
Leave your assets in the plan.
Transfer the value to another pension plan (if you’re joining one that allows transfers).
Transfer the value to a Registered Retirement Savings Plan (RRSP) or another registered plan.
Take the cash value (if it’s not locked in).
Do RPPs charge fees?
Yes. Defined benefit plans pay fees out of the pension fund for administration, investment management, and actuarial services. In a defined contribution plan, you may pay fees for these services, but they’re built into the plan’s general management expenses.
Because RPPs pool many members' savings, their fees are often lower than what an individual might pay on their own.
RPP vs RRSP
A Registered Retirement Savings Plan (RRSP) is another way to save for retirement, but it isn’t linked to your employer like an RPP. You can set it up on your own with any institution approved by the CRA. You can contribute to an RRSP until the end of the year you turn 71, at which point you must roll the plan into a Registered Retirement Income Fund (RRIF), an annuity or convert it to cash. Your spouse can also contribute if you have a spousal RRSP set up.
The main difference between RPP and RRSP accounts is that an RPP is employer-based while an RRSP is an individual account. An RPP is managed by a provider chosen by the employer, while RRSP investors choose their own provider and plans. People with RPPs may or may not be able to contribute, and those who do may receive matching contributions from their employer.
A related option is the Group Registered Retirement Savings Plan (GRSP), which is also an employer-sponsored plan.
RPPs and RRSPs share similar tax treatment, but their access rules differ. Both offer tax-sheltered growth, which helps your savings grow faster. The key difference: RPP funds are generally locked in until retirement, while RRSP funds can be withdrawn any time (though withdrawals are taxed as income).
With an RRSP, you deduct your contributions on your yearly tax filing. The gains from both plans are tax-deferred, so you only pay tax when you take the money out.
Disadvantages of RPPs
RPPs can be an effective way to save, since your employer is required to contribute, but they have a few disadvantages:
Locked-in funds: you typically can’t access the money until retirement, even if you need cash for an emergency.
Limited control: you can’t choose the financial institution and if you’re allowed to make investment choices, the options can be limited.
Eligibility: You must usually be a full-time employee to qualify. Part-time employees are generally entitled to join once they meet a set threshold — commonly earning at least 35% of the YMPE, or working at least 700 hours (often over two consecutive years).
With an RRSP, you control who holds the money and how it’s invested. You can make taxable withdrawals at any time without penalty. Unused contribution room accumulates and carries forward to future years, as can unused deductions, and if you set up a spousal RRSP your spouse can contribute to it on your behalf.
RRSPs have some downsides too, including contribution limits based on a percentage of your income and the lack of an employer match.
Which account suits you depends on your situation, and many Canadians enrol in both types of plan. If you contribute to both an RPP and an RRSP, keep an eye on your available RRSP room — your RPP participation generates a pension adjustment that reduces your RRSP contribution limit, so it's possible to over-contribute if you don't account for it. Your Notice of Assessment shows your current RRSP deduction limit. If your employer matches retirement contributions, an RPP lets you benefit from that match. If you aren't employed full-time, an RRSP or another non-employer-based savings account may be your main option.
RPP contribution rules
If you have an RPP, your employer makes contributions on your behalf. If you can and want to contribute as well, you’ll need to arrange with your employer to have the proper amount deducted from your paycheque.
RPP contributions — whether they’re made by you or your employer — are not taxed for Canadian residents. Canadians living abroad may have to pay local income taxes, however. If you live outside of Canada, check with the local tax office.
Unlike most investment accounts, money earned from investments inside your RPP isn’t subject to capital gains taxes. This means your money grows tax-deferred as long as it stays in the account.
The maximum you can contribute to an RPP depends on the type of plan you have. For defined benefit plans, contributions are actuarially determined to fund the promised pension amount, so there's no simple annual dollar limit on contributions — instead, the plan is capped by the maximum pension benefit the CRA allows.
Defined contribution plans don’t guarantee a pension amount, but you can choose the amount you contribute. These plans follow the same 18%-of-income rule as RRSPs, but the dollar limit is higher — the money-purchase limit ($35,390 in 2026) versus the RRSP limit ($33,810 in 2026). In fact the RRSP dollar limit equals the previous year’s money-purchase limit.
Here are the limits for defined contribution plan contributions and defined benefit payouts, according to the CRA. We’ve also included the RRSP contribution limits and each year’s maximum pensionable earnings for comparison.
Year | Defined Contribution Yearly Contribution Limit | Defined Benefit Yearly Payout Limit | RRSP Contribution Limit | Year’s Maximum Pensionable Earnings |
|---|---|---|---|---|
| 2026 | $35,390 | $3,932.22 | $33,810 | $74,600 |
| 2025 | $33,810 | $3,756.67 | $32,490 | $71,300 |
| 2024 | $32,490 | $3,610.00 | $31,560 | $68,500 |
| 2023 | $31,560 | $3,506.67 | $30,780 | $66,600 |
| 2022 | $30,780 | $3,420.00 | $29,210 | $64,900 |
It’s important to note that contribution limits change every year. Check with the CRA and your Notice of Assessment each year to ensure you aren’t contributing too much. Your online tax filing software may have some information as well.
Registered pension plan withdrawal rules
Contributions to an RPP are typically “locked in.” This means they can’t be withdrawn until retirement.
However, if your employment with the plan provider ends, you may be able to have your plan paid out, depending on your circumstances. For instance, you may get a payout if you’re no longer a Canadian resident, have a very low balance, face serious financial hardship, or have a shortened life expectancy. Check with your plan administrator to learn whether you can get a payout. Depending on the province you live in, personal contributions may be vested so they won’t be locked in.
Defined benefit RPPs only pay out when you retire, and you will receive the plan’s fixed amount. You will have to pay income tax on these withdrawals.
Defined contribution RPPs grow as you hold investments, and the gains are not subject to capital gains taxes. At retirement, the savings are typically moved into a locked-in retirement income vehicle (such as a LIF) or used to buy an annuity, and the income you draw is taxed. There are usually annual minimum and maximum withdrawal limits set by pension rules — you generally can't withdraw the whole balance at once.
