LLQP Segregated Funds & Annuities · Component 1.2 · 35% of the exam
The 'pension adjustment' (PA) reported on a T4:
- AIncreases RRSP room, since it credits the member for the tax-assisted saving done through the plan
- BIs a tax deducted at source on the value of pension benefits accrued during the year
- CIs irrelevant to RRSPs, since pension plans and RRSPs are governed by separate limits
- Reduces next year's RRSP room by the value of pension or DPSP benefits accrued
Correct answer: D) Reduces next year's RRSP room by the value of pension or DPSP benefits accrued
The PA integrates pension and RRSP limits. Clients with rich pensions have little RRSP room.
Why the other options are wrong
- AThe pension adjustment reduces RRSP room; it never increases it.
- BIt is an adjustment to room, not a tax.
- CIt directly affects RRSP room to equalize tax-assisted saving.
Exam tip
PA reduces next year's RRSP room.
Common mistake
Recommending RRSP contributions to a DB member without checking room.
What this tests
CISRO competency component 1.2 — Assess the client's needs and situation — which is weighted at 35% of the Segregated Funds & Annuities module. Written against the published curriculum.
More from component 1
- The first step before recommending a segregated fund or annuity is to:
- A client's 'time horizon' for an investment is:
- 'Risk tolerance' in an investor profile refers to:
- A client says he wants 'high returns with no risk of losing money'. The agent should:
- Investment objectives are commonly classified as:
- Why is the client's marginal tax rate relevant to a segregated fund recommendation?
Practice the whole Segregated Funds & Annuities module
Timed sets weighted like the exam, and review of every question you miss. Free to start.