What is a Group RRSP?
A Group RRSP (Registered Retirement Savings Plan) is simply a collection of individual RRSPs offered to a group of employees. It can be offered to as few as two employees up to several thousand. Some plans have no set-up or annual administration fees but may require a minimum total annual plan contribution.
By establishing a Group RRSP in your workplace and restricting withdrawals for a certain period of time, an employer can help employees to save for their retirement goals. Combining this with education, complimentary personal planning and employer matches sends a strong message that you care about the future success of your employees and their families and builds a culture of loyalty.
What Are the Advantages of a Group RRSP?
The Employee’s contributions are made with pre-tax dollars reducing taxes paid each pay period. As an example, if we assume that the employee is in a 40% income tax bracket, a $25 RRSP contribution effectively only costs $15 net.
If the Employer chooses to do a partial or full match of the contribution, this is “free money” and will help to build savings even faster.
By investing on a continual basis, the employee reduces their investment risk and takes advantage of dollar cost averaging.
When contributions are automatically deducted, before being paid, the employee develops the savings habit and does not spend what they do not see.
By participating in a Group Plan, the administration of the plan is centralized resulting in lower management fees.