A Pooled Registered Pension Plan (PRPP) provides an accessible, low-cost retirement savings option for millions of Canadians who lack employer-sponsored pension plans.
If you are among the private sector workers or self-employed Canadians without workplace retirement benefits, learn how taking advantage of a PRPP can help you save and invest for a secure financial future.
What is a Pooled Registered Pension Plan (PRPP)?
A PRPP is a defined-contribution pension plan framework established under Canada’s Pooled Registered Pension Plans Act. Introduced by the Canadian government in June 2012, it provides an accessible workplace pension plan for the millions of Canadians who do not have access to an employer-sponsored registered pension plan (RPP).
While participation is voluntary for both employers and employees, PRPPs must be administered by licensed companies authorized by the Office of the Superintendent of Financial Institutions (OSFI).
How Does the PRPP Work in Canada?
The pooling concept of PRPPS allows contributions from thousands of employees across the country to be combined into a single large-scale plan. This provides economies of scale and access to more sophisticated and lower-cost investment options than individuals could achieve investing solo in RRSPs.
Employee and employer PRPP contributions flow into the individual member’s account. Each member has their own account tracked using their Social Insurance Number. They maintain control over how their share of the pooled funds is invested. The funds are then pooled with all other PRPP members’ contributions and invested by the PRPP administrator based on the member’s selected options.
Both employer and employee PRPP contributions receive comparable tax treatment to the RPP. One of the main attractions of PRPPs is the tax-deferred growth potential. No taxes are paid on investment income and gains earned within a PRPP account until funds are eventually withdrawn. This provides an immediate tax benefit for individuals as contributions are deducted directly from payroll and reduce taxable income.
Who is Eligible to Join a Pooled Registered Pension Plan?
Employees with a valid Canadian SIN number can apply for the PRPPs if they meet one of the following requirements:
- Work in federally regulated workplaces (banks, telecommunications, transportation) for an employer that offers PRPP.
- Reside in a province that has required PRPP legislation in place, including British Columbia, Saskatchewan, Ontario, Nova Scotia, Quebec, and Manitoba.
- Employees and self-employees in Nunavut, Yukon, or Northwest Territories.
Remember that individuals can only join a PRPP if their employer offers this pension option. Employers have discretion over which employees are eligible, such as by job category, full-time status, salary level, etc.
Contribution to a Pooled Registered Pension Plan
Both employee and employer contributions can be made to an individual’s PRPP, subject to the following rules:
PRPP Contribution Limits
Similar to RRSPs, the maximum annual PRPP contribution limit is set at the smaller of:
- 18% of earned income from the previous tax year
- The current year’s RRSP limit
The RRSP limit for 2025 is $32,490, which acts as the cap for total PRPP contributions. Unused PRPP contribution room can be carried forward each year.
Employee Contributions
PRPP members can make voluntary contributions through payroll deductions, lump sum payments, etc. These contributions are tax-deductible like RRSP contributions. Contributions can continue even after leaving the original participating employer.
Employer Contributions
Employers can opt to contribute to an employee’s PRPP, but are not required to. This contribution is not included in the employee’s taxable income and is not tax-deductible for the employee.
Contributions from Tax-Exempt Income
Certain tax-exempt income earned by Indigenous individuals can be used for PRPP contributions and will increase their PRPP deduction limit. While not deductible, these contributions can be designated as repayments under the Home Buyers Plan (HBP) or Lifelong Learning Plan (LLP).
How to Withdraw Funds from a PRPP
PRPPs are designed as retirement savings vehicles. Pre-retirement withdrawals are discouraged and face restrictions:
- Withdrawals can only be taken once PRPP contributions have ceased. Exceptions apply for financial hardship unlocking.
- Funds cannot be withdrawn as a lump sum. They must first be transferred to a retirement income vehicle.
- Withdrawals or transfers made from a PRPP are added to taxable income for that year.
Upon retirement, members have several options:
- Transfer the PRPP balance to a Registered Retirement Income Fund (RRIF)
- Use funds to purchase an annuity.
- Take out scheduled retirement income payments directly from the PRPP.
In the event of a member’s death, the PRPP funds form part of their estate and can be designated to beneficiaries as desired.
Transferring Funds Into or Out of a PRPP
One of the advantages of PRPPs is to consolidate retirement savings from other registered plans using direct transfers.
Transfers Into a PRPP
Funds can be directly transferred into a PRPP account from an RRSP, RRIF, RPP, SPP (Specified Pension Plan) or DPSP (Deferred Profit Sharing Plan). For relationship breakdown transfers, the PRPP can accept funds from a former spouse’s registered plans.
Transfers Out of a PRPP
Funds can be directly transferred out of a PRPP into an RRSP, RRIF, RPP, SPP, or other PRPP.
- Transfers to a registered disability savings plan are allowed for financially dependent beneficiaries.
- Relationship breakdown transfers to a former spouse’s registered plan are permitted.
Transfers After Death
The deceased member’s PRPP balance can be transferred to a plan belonging to the surviving spouse or partner. Financially dependent children or grandchildren can transfer funds into a registered disability savings plan.
Investment Options for PRPP Members
A central promise of the PRPP is to provide retirement savings opportunities at a low cost. The types of investments held within them are generally similar to what you would find in an RRSP, such as mutual funds, GICs, bonds, and exchange-traded funds (ETFs).
PRPP administrators can offer a maximum of six investment options. These must provide varying degrees of risk and expected return to allow a prudent investor to build a suitable portfolio.
If a member does not make an investment choice within 60 days of receiving their plan notice, their funds are automatically invested in a default option. This default must be either a balanced fund or a life-cycle/target-date fund that automatically adjusts its asset mix to become more conservative as the member ages.
How Do PRPPs Compare to Other Retirement Savings Plans?
PRPPs offer some unique advantages but also have similarities to other common registered savings plans,
PRPPs vs. RRSPs
Both PRPP and RRSP allow tax-deductible contributions up to an annual limit. The diference is that you can contribute to a Spousal RRSP, which can be a valuable income-splitting tool for retirement, while this is not permitted with a PRPP.
An individual RRSP offers unlimited investment choice and the ability to withdraw funds for the Home Buyers’ Plan or Lifelong Learning Plan. PRPPs are locked-in and have a limited menu of investment options. However, it offer potentially lower investment fees through pooled funds.
PRPPs vs Defined Contribution Pension Plans
In a DCPP, employer contributions are typically mandatory as a core feature of the plan. In a PRPP, employer contributions are entirely voluntary.
PRPPs vs Group RRSPs
When an employer contributes to your PRPP, that money is not considered a taxable benefit and does not appear on your T4 slip as income. In contrast, in a Group RRSP, the contribution is considered a taxable benefit. Although you get an RRSP deduction to offset this income, it still increases your income for calculating things like payroll taxes and certain income-tested benefits.
PRPPs are legally required to have low fees, comparable to large institutional pension plans. While some Group RRSPs have competitive fees, many have higher Management Expense Ratios (MERs) than a PRPP.
Selecting and Working with a PRPP Administrator
Unlike RRSPs, which are offered by many financial institutions, PRPPs can only be administered by specialized companies licensed by OSFI, which are Sun Life Financial, Manulife Financial, RBC, Industrial Alliance, and Canada Life.
The administrator is responsible for maintaining plan records and member accounts, ensuring contribution limits are not exceeded, investing the pooled fund assets as directed, and providing member statements.
Choosing a PRPP provider will be the responsibility of each individual employer. Members should understand the investment options and fees charged by the PRPP administrator.
Tips for Maximizing Your PRPP Savings
While PRPPs provide an accessible workplace savings option, they work best as part of an integrated retirement planning strategy. Here are some tips for making the most of a PRPP:
- Take advantage of any employer contributions – this is free extra money.
- Supplement PRPP savings with other plans like TFSAs to diversify tax treatment.
- Contribute frequently through payroll deductions rather than lump sums.
- Selecting an appropriate risk profile and asset mix.
- Review fees charged and utilize the administrator’s low-cost funds where possible.
- Plan contribution amounts carefully based on your RRSP limit and income.
- Consolidate old pensions and RRSPs through direct transfers to your PRPP.
Over the long term, consistency and maximizing contributions will lead to the greatest accumulation of retirement wealth in your PRPP account.
Frequently Asked Questions About PRPPs
Can I contribute to my spouse's PRPP?
No, PRPP contributions must be made to your own account.
What happens with my PRPP if I change employers?
Your PRPP account stays with the same administrator. You can continue contributing or transfer it to your new employer's plan.
Can I take a break from contributing to my PRPP?
Yes, you can cease contributions for up to 5 years and remain a plan member.
How are PRPP tax receipts handled?
Your administrator issues annual receipts for your contributions and your employer's contributions.
What happens with my PRPP when I retire?
You can convert your PRPP to a retirement income option like a RRIF or annuity. It can remain a PRPP if taking income directly.
The Bottom Line
For Canadians without workplace pension coverage, a PRPP provides an affordable way to save for retirement while gaining professional investment management and tax advantages. While contributions are voluntary, participating allows you to build retirement wealth in a low-cost, regulated structure. When shopping for a PRPP provider, minimize fees and select an investment mix appropriate for your savings goals and risk tolerance.
