You receive immediate tax savings when you join the OMERS Pension Plan.
Under the Income Tax Act, the federal government provides you with tax relief on the contributions that you pay into OMERS.
- You contribute a percentage of your earnings to help pay for your future OMERS pension.
- Your employer deducts these contributions from your gross income, which reduces your taxable income – the amount of income on which you pay taxes. As a result, over the course of the year, the income on which you pay taxes has been reduced by the amount of your pension contributions.
- This is like contributing to an RRSP – except that your employer reduces your tax right away, so that you don't have to wait until you file your tax return to benefit.
- Your employer also contributes an equal amount. These contributions are not a taxable benefit – you do not count them as income.
- Once you retire and begin collecting your OMERS pension, income tax will be applied to your payments. However, in most cases, it will be at a lower marginal tax rate than when you were employed.