A DPSP is set up by your employer to help you save for retirement. You don’t make contributions – the company does, from a portion of its profits.
Six things to know about DPSPs
- DPSP contributions are tax-deductible to you, so you don’t pay tax on the amount contributed.
- Your investment earnings are tax-sheltered. You don’t pay any tax on the earnings until you withdraw them.
- Your RRSP contribution room is reduced by the DPSP contributions you received in the previous year.
- Companies often combine a DPSP with a pension plan or Group RRSP to provide retirement income for employees.
- With most plans, you decide how your DPSP money is invested. Some companies require employees to buy company stock with some of the contributions.
- When you leave your employer, your DPSP money can be transferred to an RRSP or RRIF, used to buy an annuity, or taken in cash (it will be taxed as income in the year you receive it).
Content in this section is provided in partnership with Investor Education Fund, a non-profit organization founded and supported by the Ontario Securities Commission that provides unbiased and independent financial tools to help Canadians make better money decisions. To find out more, go to: GetSmarterAboutMoney.ca
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