Could a client only receiving Pension Income make the allowable $2,000 RSP overcontribution?


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Generally, anyone can make a $2K over contribution to their RRSP (unless you are under 18 I believe). However, if you don't have any RRSP room, you can't deduct it. The over contribution will stay on file with CRA to carry forward to a future year when new room "opens up" (assuming they are still working or creating RRSP room via another means). 

The $2K will be tax sheltered along the way which is good. However, if new room never opens up (if they are no longer working for example), they will still be taxed when they eventually withdraw the funds; unless you meet one of two exceptions. 1) If you meet certain conditions you can take an offsetting deduction on your tax return or 2) If you qualify, you can fill out a special form to withdraw the funds without the institution withholding tax. 

If you don't meet one of the exceptions, you will end up paying tax on the $2K for which you never had the benefit of a deduction. In other words, you will be doubled taxed. 

In summary, unless you have new room that will "open up" in the future, I don't see the point of doing this. It's a lot of hassle just to get an extra $2K of tax sheltered growth with the potential to be taxed on this income when it's withdrawn without the benefit of a deduction. If they have TFSA room, I would just recommend investing the $2K in that. 

Hope this helps. 

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