Additional Voluntary Contributions (AVCs) and your RRSP
The basic rules on Additional Voluntary Contributions to the Queen’s Pension Plan (AVCs) differ somewhat from a Registered Retirement Savings Plan (RRSP). Your AVC limit each year is 18% of your pensionable earnings in that year to a dollar limit ($26,230 for 2017) less your “pension adjustment” in that year. RRSPs work on the basis of the prior year’s information – CRA (formerly Revenue Canada) calculates your 2017 RRSP limit based on your 2016 tax filing, and provides your contribution limit as part of the corresponding assessment notice.
So, if you decide to make AVCs in 2017, you can make an RRSP contribution this year as well. When Pension Service calculates your pension adjustment for 2017 (Box 52 on your T4 for 2017), this figure will include any AVCs made during the calendar year (either through the year by payroll deduction, or by lump sum contribution in December). Therefore, your 2018 RRSP limits will be reduced significantly (and may be eliminated unless you have some carry forward “room” based on unused RRSP limits of prior years).
Monthly AVC Application (365 KB)
Reasons to make AVCs
- good rates of return (the same as that experienced by the Queen’s Pension Plan);
- low fees – less than half of 1%;
- no concerns over how your money is being managed; and
- if set up via payroll deduction the reduction in income tax will be factored in by Payroll Services.
Note that your AVCs cannot be withdrawn prior to leaving Queen’s. If you die in service, the value of your AVC account will be payable to your named pension beneficiary. At retirement, the funds are yours and there are several options:
you can withdraw the funds in cash (but will have to pay income tax);
you can transfer the funds to an external non-locked in RRSP, which means they can be subsequently deregistered or used to buy a Registered Retirement Income Fund; or
they can left in the Plan to provide additional Queen’s pension.
Reasons to make RRSP contributions instead:
contributions can be made to a spousal RRSP as a form of income splitting (this can’t be done with AVCs), but if your spouse is working this may not be an issue;
you can tailor your investments to meet specific goals – for example, if you are relatively far from retirement, you might want to take on a bit more risk and invest a higher percentage of assets in equities (the QPP portfolio is balanced; for a more detailed description, please see our Quarterly Report); and
the RRSP can be a source of emergency funds.
Further questions? If so, please contact Pension Services, Department of Human Resources (32070 or email@example.com).