Characteristics of Defined Contribution Pension Plans
(Money Purchase RPPs)
Pensionable age is specified by the pension plan and can
vary from plan to plan.
Pension payments cannot be split between spouses, except in
the case of a court ordered split, due to separation or divorce.
Due to the pension
income splitting available on the tax return, this is less important.
The pension adjustment (PA, reported on the T4) reduces the amount that the employee
can contribute to an RRSP.
Employer or plan sponsor contributions are not taxable
to employees.
Pension benefits will be paid out (usually in monthly
payments) over the lifetime of
the employee after retirement.
If there is a spouse, then the plan must be set up to
continue payments to the spouse upon death of the member, unless the spouse has
signed a waiver.
The amounts to be contributed to the plan are specified in the
plan contract.
The retirement income of the employee will depend upon how much has been contributed to the
plan, and how well the investments in the plan have done.
The maximum amount of contributions to the plan for each
employee is restricted by the Income Tax Act.
Employee contributions are tax deductible.
Many plans allow members to choose their own investments.
Contract negotiations could reduce future contributions, but
won't change the amount already in the plan for each employee.