DC pension projector: what your account could pay

In a DC plan, the risk sits with you

A defined contribution plan fixes what goes in: a percentage of your pay, and whatever your employer adds. What comes out is not promised. It depends on how the investments perform, what the fees take, and how long you need the money to last.

That is the big difference from a defined benefit plan, where a formula sets your pension and the plan carries the investment risk. In a DC plan, two questions land on your desk:

• Market risk. A weak decade just before retirement can shrink the account right when you need it. That is why many members shift to a steadier mix as retirement nears, and why this projector lets you set a separate return after retirement.
• Longevity risk. Nobody knows how long they will live. Plan to too young an age and the money runs out while you still need it. The guidelines below suggest planning to an age you have only about a one-in-four chance of outliving.

At retirement, the account usually moves to a life income fund (LIF) or buys an annuity. An annuity hands the longevity question to an insurer. A LIF keeps it with you, along with the investment choices. Your plan booklet explains which options your plan allows.

Where the default assumptions come from

The starting dials follow the 2026 Projection Assumption Guidelines, published in April 2026 by the Institute of Financial Planning and FP Canada Standards Council. Planners use them to keep long-term projections realistic and defensible.

• Inflation 2.1%, and salary growth of 3.1% (inflation plus 1%).
• Return before retirement 4.8% before fees. That is the guidelines' own illustrative balanced mix: 5% short term, 45% fixed income and 50% equities.
• Fees 1.3%, the guidelines' illustrative fee, which takes that mix to 3.5% net. Group plans often cost less, so check your plan statement and lower the dial if yours does.
• Return after retirement 4.3% before fees. We built it from the same asset returns with a steadier mix: 5% short term, 60% fixed income and 35% equities.
• Income to age 95. The guidelines recommend a planning age with no more than a 25% chance of outliving your money. For a 65-year-old, their 2026 table puts that near 94 for men and 96 for women.

The guidelines already build in a safety margin: each equity return has 0.5% subtracted to allow for how much long-term returns vary. They also allow planners to move a return assumption up or down by 0.5%, and ask for a written reason for anything beyond that. If you slide the return dials well past those bounds, treat the result as a stress test, not a plan.

Why contributions can be capped

The Income Tax Act limits how much can go into a DC pension each year. Your contributions and your employer's combined cannot exceed the lesser of the money purchase limit ($35,390 for 2026) and 18% of your pay for the year. When your dials push past that, the projector trims the contributions and says so in an amber note. Those contributions also become your pension adjustment in box 52 of your T4, which reduces your RRSP room for the next year.

Keep going

• Understanding Pensions: the whole series, in learning order.
• DB or DC: which pension do you have, and how to tell from your statement.
• DB pension calculator: what a defined benefit formula pays.
• Your right to pension information: what you can ask your plan administrator for.
• Trevor's Know thy pension reel series walks through pension types on camera; watch it on the Videos page.