Saving for retirement usually happens gradually, over many years of steady contributions. But like every long journey, it begins with a first step: setting up the right retirement savings accounts to work toward financial security.
Two common options are Registered Pension Plans (RPP) and Registered Retirement Savings Plans (RRSP), which have distinct differences and come with various pros and cons.
What is a Registered Pension Plan (RPP)?
An RPP is a retirement savings plan your employer sets up for you. They register it with the Canada Revenue Agency (CRA), and usually with a federal or provincial pension regulator too. Your employer has to contribute, and depending on the plan, you might contribute as well — straight off your pay cheque, before tax. Your employer also chooses which financial institution holds the plan and which investments the plan offers.
With an RPP, your employer contributes to the plan, which helps your savings grow faster. That's a key difference from a group RRSP, where the employer match is optional. Once you retire, you'll get regular payments from the plan and pay tax on that money then.
RPPs come in two types: defined benefit RPPs and money purchase. A defined benefit plan promises you a set pension when you retire, and contributions are adjusted to hit that target. There's no fixed annual contribution cap the way money purchase plans have one — but it's not unlimited either. The CRA caps the pension you can build at $3,932.22 per year of service for 2026. A money purchase plan works the other way: you and your employer contribute set amounts, there's no promised pension, and the contributions are subject to annual limits.
What is a Registered Retirement Savings Plan (RRSP)?
An RRSP has nothing to do with your employer — you open it yourself, at any financial institution the Canada Revenue Agency (CRA) has approved. You can keep contributing until the end of the year you turn 71. After that, the plan has to close, and you choose one of three things: convert it to a Registered Retirement Income Fund (RRIF), buy an annuity, or take the money in cash.
Both plans give you a tax break on what you put in — the timing is just different. With an RPP, contributions come off your pay before tax is calculated. With an RRSP, you contribute and then claim a deduction on your tax return, which lowers your taxable income for that year. Both grow tax-deferred, and both are taxed when you take the money out.
There are also group RRSPs (sometimes called GRRSPs) — a bundle of individual RRSPs with centralized administration that you pay into through work. They follow the same contribution and tax rules as a personal RRSP, so they belong on the RRSP side of this comparison, not the pension side. Although you own the RRSP, some employers may restrict withdrawals while you're still working for them.
RPP vs. RRSP at a glance
Both accounts help you save for retirement and defer tax, but they differ in who sets them up, who contributes, and when you can access the money. Here is a quick side-by-side comparison.
Feature | Registered Pension Plan (RPP) | Registered Retirement Savings Plan (RRSP) |
|---|---|---|
| Who sets it up | Your employer | You |
| Who contributes | Your employer (they're required to contribute), and you may too, depending on the plan | You — and you can contribute to a spousal RRSP for your spouse or common-law partner, from your own limit |
| Choice of provider | Chosen by your employer | Chosen by you |
| Tax treatment | Contributions made pre-tax; growth is tax-deferred; taxed on withdrawal | Contributions are tax-deductible; growth is tax-deferred; taxed on withdrawal |
| Access before retirement | Usually locked in until retirement | Withdraw anytime, though withdrawals are taxable — tax is withheld upfront, and the contribution room isn't restored |
| Contribution limit | Set by plan type. Money purchase plans have an annual cap. Defined benefit plans don't cap contributions, but the CRA's defined benefit limit caps the pension you can build. | 18% of prior-year earned income (up to the annual maximum), plus unused room carried forward — less your pension adjustment if you have an RPP |
Similarities and differences between RPPs and RRSPs
Tax-deferred savings: Both grow tax-deferred and are taxed on withdrawal. RPP contributions come off your pay before tax; RRSP contributions are deducted at tax time.
Contribution limits: Money purchase RPPs and RRSPs both cap what you can contribute each year at 18% of income, up to a dollar maximum — but they measure income differently. Your RRSP limit uses last year's earned income; a money purchase RPP uses this year's pensionable earnings. Defined benefit RPPs have no annual cap, though the CRA limits the pension they can build. Unused RRSP room carries forward to future years.
Age limits: An RPP sets its own rules on when payments start, though they generally have to begin by the end of the year you turn 71 — the same deadline as your RRSP.
Employer-based vs. individual: With an RPP, your employer picks the provider and contributes. With a personal RRSP, you choose the provider and there's no match — though a group RRSP through work often has one.
Pros and cons of RPPs and RRSPs
Each of these plans has its pros and cons. Here’s a look at what makes each of them appealing and potentially undesirable.
Registered Pension Plan (RPP)
RPPs are appealing because your employer contributes to the plan — but the trade-off is that your money usually isn't accessible until retirement age.
Pros
Your employer contributes to the plan, and some plans also match what you put in.
Your contributions are deducted pre-tax from your pay cheque by your employer.
Funds grow tax-deferred while they’re in the account (you pay tax when you withdraw).
Cons
You don't choose the financial institution or the plan. In a money purchase plan you can usually pick your investments — but only from the menu your employer's plan offers.
Eligibility isn't automatic. Part-time and casual employees usually have to hit a threshold first — commonly 35% of the year's maximum pensionable earnings, or 700 hours, in each of two consecutive years. The exact rule depends on your plan and your province.
Your funds are likely to be “locked in” the fund until you retire.
Being in the plan shrinks your RRSP room. Your pension adjustment — the value of the benefit you earn each year — comes off next year's contribution limit, even if you don't pay into the pension yourself.
Registered Retirement Savings Plan (RRSP)
RRSPs let you withdraw before retirement, but you face contribution limits.
Pros
You choose the financial institution and the plan.
You can withdraw anytime, though tax is withheld upfront (10–30%, depending on the amount; different rates apply in Quebec) — and you don't get that contribution room back.
You can open a spousal RRSP for your spouse or common-law partner — and they can do the same for you. There's no extra room, though: whoever pays in uses their own limit and gets the deduction.
Unused contribution room carries forward to future years. Going over your limit is a different story — anything more than $2,000 above it gets taxed 1% per month until you take it out. That $2,000 cushion only kicks in the year after you turn 18.
Cons
An individual RRSP has no employer match — though a group RRSP through work often does.
Your contribution limit may shrink if you're a member of an RPP.
You can only contribute to your own RRSP until the end of the year you turn 71. After that, you can still pay into a spousal RRSP until the end of the year your partner turns 71 — as long as you have contribution room left.
How to decide which account is right for you
Sometimes your job makes the choice for you. If you don't have access to a workplace plan, you'll use an RRSP or another non-employer option. And if you have a workplace pension, it's usually worth joining (many plans enrol you automatically) and contributing enough to get any match on offer — it's basically extra pay you'd otherwise leave behind.
An RRSP is attractive if you want more control over your savings, think you might want to withdraw before retirement age, or want a partner to be able to contribute on your behalf. If one of you earns much more than the other, a spousal RRSP can help: the higher earner contributes and claims the deduction, while the account belongs to the lower earner — which can even out your household's taxable income in retirement.
You might want both an RPP and an RRSP — especially if you have a defined benefit pension that will pay you a set income in retirement. You can estimate that income and decide whether to save more in an RRSP to top things up. One wrinkle: your pension adjustment may reduce your annual RRSP contribution limit.
