Tax information for active members
Learn about your pension and income taxes, including what you need to know about pension adjustment amounts and your RRSP contribution limit.
Your pension can provide you with a reliable and secure source of income in your retirement. As a central component of your personal finances, it is important to understand the tax implications of your pension.
When you are an active member, your pension contributions are deducted from each paycheque based on your gross pensionable earnings. This means your employer deducts your pension contribution from your salary payment before deducting income taxes, which reduces your taxable income. You are also not taxed on the interest and investment earnings that accumulate in the plan.
Pension contributions and RRSPs
The Canada Revenue Agency (CRA) allows Canadians to contribute to registered retirement savings vehicles and receive a tax deduction on the amount invested. The most common retirement savings vehicles are registered pension plans (like the WorkSafeBC Pension Plan) and registered retirement savings plans (RRSPs).
The CRA allows you to contribute a portion of your previous year’s earned income (subject to an annual maximum) to registered retirement savings.
You build up your registered retirement savings through your contributions to the WorkSafeBC Pension Plan. You may also want to contribute to an RRSP. However, since you are already paying into a registered pension plan, your RRSP contribution room will be amended.
You will receive a pension adjustment amount, which represents the value of the pension benefits you earned in the previous year.Your pension adjustment is calculated by the WorkSafeBC Pension Plan and will be shown on your annual T4 information slip. The CRA uses the value of the pension adjustment to calculate your next year's RRSP contribution room. You can find the value of your RRSP contribution room for the current year on the CRA notice of assessment you receive after you file your income tax.
Your pension adjustment may increase or decrease if:
- You transfer service to or from another pension plan
- You transfer your pension benefits out of the plan
Any change in the amount of your pension adjustment will affect the amount you can contribute to an RRSP.