Tax Tip: Understanding pension adjustments

Pension adjustments reflect the value of benefits you earned under your employer’s Registered Pension Plans or Deferred Profit Sharing Plans.

To calculate your pension adjustment, your employer takes into account his contributions to your retirement accounts, forfeited amounts and your current income. Your employer reports the relevant amount in box 52 of your T4 slip.

You are required to report this amount on line 206 of your income tax return. This amount does not affect your income — either as earnings or as a deduction — but it can lower how much you can contribute to your Registered Retirement Savings Plan in the following year.

Luckily, you don’t have to calculate how your pension adjustment affects you RRSP contributions limits on your own. Instead, you can use the Canada Revenue Agency’s My Account online service to view your current contribution limits based on your income, previous contributions and pension adjustments.