RRSP vs. RPP: What’s the Difference for Canadian Retirees

Registered Retirement Savings Plan vs. Registered Pension Plan: an Overview

Registered retirement savings plans (RRSPs) and registered pension plans (RPPs) are retirement savings plans that are registered with the Canada Revenue Agency (CRA).

RRSPs are individual retirement plans, while RPPs are plans established by companies to provide pensions to their employees. The two plans are comparable to defined-contribution savings plans and defined-benefit pension plans, respectively, in the United States.

Key Takeaways

• RRSPs and RPPs are Canadian retirement investment vehicles for workers.
• An RRSP is a retirement savings and investment account for individuals, including employees and the self-employed.
• An RPP is an employee pension plan, funded by either the employer and the employee or in some cases, just the employer.
• The two plans are similar to U.S. defined-contribution savings plans and defined-benefit pension plans.
• Money is generally deposited pre-tax and investment earnings grow tax-free, but account owners pay tax when funds are distributed.

Registered Retirement Savings Plan

An RRSP is a retirement savings and investment account for employees and self-employed people in Canada.

Contributions are made before taxes. So, if someone is taxed at a rate of 30% and they contribute $1,000 to an RRSP, the entire sum is applied to the account. In contrast, if the individual received those funds as wages, they would pay $300 in income taxes.

Earnings grow tax-deferred but distributions are taxed at the marginal tax rate. RRSPs generally are not locked-in, meaning withdrawals can be taken at any time without penalty.

Individuals are allowed to contribute up to 18% of their earned income annually to their RRSP, up to an annually adjusted cap ($32,490 for the 2025 tax year and $33,810 for 2026).

They can claim a deduction for the amount of their contribution. However, there is a maximum deduction amount. You can find your maximum deduction limit on your latest notice of assessment or on “Form T1028, Your RRSP Information for Year ___.”

Importantly, if your taxable income has changed from the previous tax year, your contribution limit has also changed.

If you did not make maximum contributions in previous years, however, you may add the value of contributions that were allowed but not made to your current year’s allowance. As a result, your maximum contribution limit may be higher than the listed contribution limit for a given year.

Important

If you contribute more than the annual allowed maximum amount, the extra contribution is considered excess. Excess contributions may be taxed at a rate of 1% per month.

Registered Pension Plan

An RPP is a trust that provides an employee with pension benefits after they retire. They are registered with the Canada Revenue Agency. There are two types of RPPs: defined benefit RPPs and money purchase RPPs.

An RPP can be funded by an employer alone or an employer in conjunction with an employee. Funds are contributed to the pension for a number of years until the recipient of the pension reaches retirement age, or leaves the company. Generally, RPPs are locked-in, meaning withdrawals are restricted.

Defined Benefit RPPs

Maximum contributions to RPPs depend on the type that an employer offers. With defined benefit plans, the pension amount is known and does not change, but the contribution amount varies. These plans do not have a yearly maximum contribution limit.

Money Purchase RPPs

Money purchase (or defined contribution plans) do not have a set or predictable pension amount, but employees know how much they can contribute. Employers can contribute up to 18% of an employee’s annual income.

Employees, if allowed to contribute, can deposit more, up to a maximum limit. For 2025 (the latest year for which data is provided), that limit is $33,810.

Contributions to the plans are tax-deductible for the employee and employer. Earnings grow tax-deferred. Funds are taxed when withdrawn. 

Key Differences

RRSP

• Individuals set up account.

• Individual account owner makes contributions.

• Contributions of up to 18% of earned income, subject to an annual cap.

• Generally, are not locked.

RPP

• Employers set up account for employees.

• Employees and/or employers make contributions.

• Contribution amounts depend on the type of RPP.

• Generally, are locked.

Special Considerations

Taxation of RRSPs and RPPs

Contributions to both RRSPs and registered pension plans are not taxed for Canadian residents (those living abroad may face local taxes).

Individuals and their employers may both contribute to RPPs, and neither’s contribution is taxed.

Money earned within both RRSPs and RPPs is not subject to income or capital gains taxes as long as the funds remain in the accounts. However, earnings from both plans are taxed as income when withdrawn or paid.

What Does It Mean When an RPP Is Locked?

It means that withdrawals from the registered pension plan are restricted. That’s because the plan is meant to promote long-term investing to build savings for retirement.

Can Someone Have an RPP and an RRSP?

Yes, they can. However, the Canadian Revenue Agency will reduce the amount they can contribute to an RRSP by their pension adjustment amount. That is the amount of pension benefits earned in the previous year in their RPP.

How Do I Open an RRSP?

You can open an RRSP at a bank, credit union, trust, or insurance company. Contact the financial institution of your choice to inquire about the RRSPs it offers and the types of investments available. If you’re a hands-on investor, you may want to open a self-directed RRSP. So be sure to inquire about these, as well.

The Bottom Line

RRSPs and RPPs are retirement savings plans registered with the Canada Revenue Agency. They’re designed to help working people save and invest for their retirement years. RRSPs are aimed at individual savers. RPPs are workplace pension plans.