Tax season is just around the corner and you might be wondering “How can I reduce my taxes?” Or, “Should I contribute to a registered retirement savings plan (RRSP)?” As a HOOPP member, you’re already a step ahead. Here’s why. 

Every dollar you contribute towards your HOOPP pension immediately reduces your tax bill. Since you make regular contributions to your pension through automatic payroll deductions, you may not notice or think about how they reduce your taxes until you get your annual T4 slip and deduct them on your tax return. Because your pension contributions are made through automatic payroll deductions, you never pay tax on that portion of your salary. This reduces your taxes immediately, while your pension continues to grow. That’s a win-win situation – pay less tax now and receive a secure pension when you retire. 

Should you contribute to an RRSP?

At tax time, RRSPs are always a popular topic of conversation. Every year the financial industry encourages Canadians to make RRSP contributions before the March 1 deadline. The advertising and advice promoting RRSPs is often geared to people who need to save on their own for their retirement. With a HOOPP pension, you are likely in a better place than many, especially if you have spent a good portion of your career, or are planning to spend most or all of your career, as a Plan member.  

Before you rush to make an RRSP contribution, take a look at your latest HOOPP annual statement and run some pension estimates on HOOPP Connect. If you haven’t already, consider registering for HOOPP Connect to get a better idea where you stand and the monthly pension you can expect to receive once you retire. The security of your HOOPP pension could also provide you with freedom to focus your additional income and savings on other financial priorities, like paying off your mortgage or other debt, upgrading your skills or saving for your children’s education. 

Lastly, if you’re planning on contributing to your RRSP, don’t forget to consider your Pension Adjustment (PA) and any Past Service Pension Adjustments (PSPAs). PAs and PSPAs are part of the tax system for retirement savings, and they reduce your RRSP room because you are earning benefits in a pension plan. You get a PA each year you earn benefits in HOOPP and a PSPA when your pension benefits are improved on a past service basis, such as a buyback or benefit improvement.  

This is particularly important if this is your first year in HOOPP. You can find your PA on the T4 slip from your employer, while PSPAs are communicated directly to you by HOOPP. Both of these reduce your available RRSP contribution room.

Is a TFSA a better option?

Depending on your savings needs, another popular option is the Tax Free Savings Account (TFSA). These plans have many great features including the ability to grow tax-free after you make a contribution. In addition, you aren’t taxed on any withdrawals and TFSAs don’t reduce your Old Age Security pension, Canada Child Tax Benefit or other income-tested federal benefits or credits. They also offer a lot of flexibility.  

If you contribute to an RRSP or TFSA, be sure to stay within the tax limits for your contributions. It’s easy to find reliable information on TFSAs, RRSPs and retirement planning – check out our suggested sources below. 

Something else for you to consider: it might be possible for you to further increase your HOOPP pension. If you’ve taken some time away from work, for example, to grow or support your family, you may be able to contribute to HOOPP for that period or buy back the period later on. The sooner you do this, the less it will cost you. Keep in mind that you can pay for a buyback using funds from your RRSP. Remember, a HOOPP pension is not like most forms of personal savings, where you need to manage investment risk and fees. Instead, as you build your service in HOOPP, you are keeping on the path to a more secure retirement.   

Take a look at these additional resources 

The following sources will help increase your financial savvy and enable you to make informed choices about retirement savings plans. 

• HOOPP.com and HOOPP Connect: Key sources of information for your HOOPP pension.  
• Get Smarter About Money.ca: Investing basics, planning your future and protecting your money. From the Ontario Securities Commission. 
• Money and Finances: Insights on managing your money, debt and investments, planning for retirement and protecting yourself from consumer fraud. Provided by the Financial Consumer Agency of Canada. 
• Public pensions: Information on the Canada Pension Plan, Old Age Security pension, the Canadian retirement income calculator and retirement planning. Provided by the Government of Canada.
• Canada Revenue Agency: Information and guidance on tax matters and access to personal tax information through the My Account portal where you can find your tax slips and RRSP deduction limits.