Lily’s RRSP contribution room is reduced by her DCPP contributions. Her total income for Year 2 was $125,000, and she contributed 5% ($6,250) to the DCPP, matched by the employer, for a total of $12,500. The Pension Adjustment (PA) for her DCPP contribution would be $12,500, which reduces her RRSP contribution room.

Calculation:

RRSP limit based on previous year’s income (18% of $120,000): $21,600

PA reduction: $12,500

Remaining RRSP contribution room for Year 2: $21,600 - $12,500 = $9,100

Including her unused contribution room: $9,100 + $15,000 = $24,100

So, Lily can contribute $24,600 to her RRSP in Year 2​.