Do I have room to contribute to my RRSP?

Jamie Golombek, vice-president of taxation and estate planning at AIM Trimark Investments, has the answer.

Jamie Golombek 16 January, 2003 | 2:00PM

Dear Expert:

I had no income last year, and I got a job in May. I contribute to my new employer's defined-contribution pension plan, into which I pay 4% of my annual RRSP contribution limit and the company pays an additional 4%. The company asked me to contribute an additional 10% to reach the 18% maximum of my RRSP. I mentioned that I had no income last year, but I was told that would be OK. Is that really the case?

Expert Opinion:

While the normal RRSP contribution limit is generally 18% of the prior year's earned income, minus any pension adjustment, different rules apply when computing the maximum contribution amounts for defined contribution pension plans. For these types of plans, the rules state that the maximum contribution is limited to the lesser of 18% of the current year's earned income and $13,500. The total contributions that both you and your employer make cannot exceed this amount. As a result, you are able to contribute the extra 10% to the pension plan.

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Jamie Golombek

Jamie Golombek