Hi, I'm wondering if there's a trick available to account for a public pension RRSP deduction amount. My spouse is a teacher in Ontario and as such, has a pension provided. There is a deduction applied which greatly reduces her available RRSP room. I couldn't find any strategy to account for this and as such, it assumes presumably a room of 18% of her income when in fact, it's probably closer to 3-5%.

Merci.

To add, currently I'm just limiting contributions to approximately her yearly limit. But I'm wondering if there's a way to reduce the available room to accurately reflect the fact that the space is indeed gone.

Yes. You are reffering to the Pension Adjustment (PA) which is a applied for both private and public defined-benefit pension plans and reduces the RRSP contribution limit. The PA calculation depends on the specifics on the pension plan. Your pension formula determines what is called the accrued benefit that determines the PA. You can ask your pension provider for what that is. For most public pensions, it is 2% (the max), and we ask you for that when you enter or edit a pension income. You must  make sure to click Submit on the the Add/Edit income form, and if the income is a DB Pension it will then ask you for specifics on that pension including:

Percent of salary accrued benefit per year, usually close to 2 (percent), check your pension formula

If you don't know, enter 2. The TIME MACHINE does calculate the PA given that and reduces the contribution room automatically.

That form also asks you for the salary it is linked to if you are still contributing to the pension, and you would have to have entered that as a seperate income previously. Other inputs on that form are for calculations of survivor benefits, and for estimating a commuted value (although that is only a gross estimate, only your pension provided knows for sure).

I apparently missed that in the process. But now I have a secondary issue... If we delay her CPP until say 70, to my knowledge, the increase relative to 65 should be available in the withdrawals. But it seems both CPP/OAS are greyed out in the tables of the TM outputs. I understand her pension is made to work with CPP, but that's presumed to be taken at 65.

When a DB pension plan says it works with CPP, that is to indicate that if you start taking the DB pension earlier than 65, the pension provides a bridge-benefit that is meant to be a CPP-like benefit untill age 65 (when CPP is presumed to actually start). There is actually no synchronization or even communication with CPP. You can start CPP any age from 60 to 70 whenever you start collecting DB pension benefits, and the DB will not affect CPP payments in any way (only when you stop contributing to CPP affects it). If you delay CPP past 65, the CPP amount is increased, and you will see that in the TIME MACHINE results. We use a slightly greyer font to indicate amounts owned by the Spouse in the TIME TABLE, it doesn't mean anything else. I suppose that is an unfortunate use of colour, I'll see if I can change it.

BTW In the MoneyReady App you can enter a bridge pension, as a separate INCOME entry.

Hmm I actually knew all of that and entered things as such (but thanks for the info regardless). Maybe something else is going on... I'll review my work and see if I can figure out what's going on then. When I changed the income to a normal Salary, numbers seem to add up. But once I switched to a Defined Benefit Pension, the amounts decreased substantially.

Our plan is to delay CPP until 70. Thus make up the difference with RRSP/TFSA since the bridge benefit goes away at 65. Also, I did enter the bridge benefit separately. I'll post back if I can't find a solution or don't understand what's going on.

Merci.

De rien. I'll let you figure it out, but just a thought on what you said. A normal Salary contributes to CPP, a Defined Benefit Pension does not. The CPP amount you'll get depends on how much and for how long you contribute to the plan.

Confirmed everything is ok. Somehow, I must have set something differently along the way. I started over the defined benefit pension income and bridge benefit, entered all the values again and presto! Things are adding up.

Considering the complexity of all of this, I'm pretty amazed at what you've built and I'm very grateful it's available to anyone.

focusedGranola0 wrote:

Confirmed everything is ok. Somehow, I must have set something differently along the way. I started over the defined benefit pension income and bridge benefit, entered all the values again and presto! Things are adding up.

Great to hear!

Considering the complexity of all of this, I'm pretty amazed at what you've built and I'm very grateful it's available to anyone.

Merci!