Anyone who has taxable employment or self-employment income in Canada and completes a tax return, can contribute a percentage of their income to an RRSP and claim the amount they contribute as a deduction against their income tax bill. As an added incentive, a growing number of Canadian employers are offering an RRSP matching program. This is a scheme where the employer will pay a matching contribution to that of the employee. Typically, this will be a percentage of the contribution the employee makes, such as 50% of the contribution up to 6% of salary. In this example, we assume that Sue earns $50,000 per year: So, in this situation, the employee is immediately getting a 50% return on their contribution by taking advantage of the RRSP matching program. The employee’s contribution is normally deducted directly from their pay and paid into their RRSP account. And the employer contribution is not treated as taxable income. Many employers offer a Group RRSP, where they use the same RRSP provider for all their employees. A Manulife RRSP is a very popular group option among employers. This normally has the benefit of reduced administration and management costs and is simpler for the employer to run. But if your employer doesn’t offer an RRSP matching program you can still open an RRSP with a wide range of financial institutions such as banks, credit unions, trust companies or insurance companies. The investments in the RRSP are not taxed on the returns they make, so benefit from additional compounding of the returns because the gross income or capital gain is re-invested. So, the same portfolio held in an RRSP will grow faster than it would in a tax-paid account. There is also the considerable advantage that the amount you contribute to an RRSP is tax-deductible, so for example if your tax rate is 35% then a $1000 RRSP contribution reduces your tax by $350. Although the RRSP enjoys tax-free growth for as long as the funds stay within it, there is tax payable when money is drawn out. How much tax depends on the circumstances of the withdrawal, which we’ll look at below. You may withdraw from an RRSP at any time, although this isn’t advisable if it can be avoided as there are tax consequences. The normal way for an RRSP to provide income at retirement is via a Registered Retirement Income Fund (RRIF) or annuity. At the time you start drawing income the funds in the RRSP must either be withdrawn or transferred to one of these options. Watch out! You can start drawing a pension at any time, but the latest is the end of the calendar year in which you reach age 71.