The Additional Voluntary Contribution Sub-account


One of my favourite components of the Personal Pension Plan (“PPP”) is the Additional Voluntary Contribution sub-account (“AVC”). One key opportunity is the ability to transfer existing RRSP assets into the AVC on a tax-deferred basis.


Why would a business owner want to do this?

Unlike a traditional RRSP, the AVC is part of a pension plan that would be set up in the corporation. Thus, assets within the AVC are able to benefit from opportunities that are available through pensions but not RRSPs. Some of the key ones are:

  • Robust Creditor protection*
  • Greater investment selection, i.e., not subject to the “Qualified Investment” rules
  • Access to investments that are only eligible for “Accredited Investors”
  • Ability to deduct investment management costs
  • Access to GST/HST Pension Entity Rebate

       *RRSPs in Ontario may be protected by the Insurance Act of Ontario


Are RRSPs a thing of the past?

Not necessarily. RRSPs still have a few advantages over the AVC sub account:

  • Spousal RRSPs can be a fantastic tool when planning for retirement income. No equivalent exists in the PPP.
  • A Pension cannot hold more than 10% of its portfolio in any single stock. No such limitation exists for RRSPs.
  • An RRSP does not require the business to be incorporated.
  • RRSPs have much lower setup and ongoing management costs.

A Parting Note

The Defined Benefit and Defined Contribution sub-accounts are relatively inflexible in terms of withdrawal options. In general, one cannot take lump sum withdrawals from either of these accounts.


The AVC is the most flexible of the three sub-accounts in this regard. One can simply transfer some or all of the AVC into a regular RRSP on a tax-deferred basis. An RRSP withdrawal can then be used to get the lump-sum amount (withholding taxes will apply).


I can assist you in determining the value of implementing the PPP as part of your overall investment and tax plan. Contact me for a free consultation to see if a PPP makes sense for you.

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All material has been prepared by Nicol Sanchez Wealth. Nicol Sanchez Wealth is an investment advisor team or Investment Advisor at Richardson GMP Limited. The opinions expressed in this blog are the opinions of the author and readers should not assume they reflect the opinions or recommendations of Richardson GMP or its affiliates.

Richardson GMP Limited, Member Canadian Investor Protection Fund.

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