What would be the consequence of Terry contributing 10% of his income into an individual RRSP in addition to his group RRSP contributions?

The consequence of Terry contributing 10% of his income into an individual RRSP in addition to his group RRSP contributions can be understood through the concept of contribution limits for registered retirement savings plans (RRSPs). Each individual has a maximum contribution limit to their RRSP, which is calculated based on earned income and previous contribution room.

If Terry is already contributing to a group RRSP through his employer, those contributions count towards the same overall limit as his individual RRSP contributions. Thus, if Terry adds an individual RRSP contribution that pushes him over the allowed contribution limit based on his income, he would indeed exceed this permissible amount. Exceeding the allowable limit can lead to tax penalties.

This understanding is crucial when considering contributions to both individual and group RRSPs, as all contributions are combined for the purpose of determining adherence to set limits. In this situation, it is essential for individuals to be aware of their total contributions to avoid incurring any excess contribution penalties.