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Group Retirement Planning

A company retirement plan can be the best way to accumulate savings for retirement.

Below we have listed the many advantages of company retirement plans:

  • Low cost: Unlike many bank GICs or mutual funds, some Group RRSPs require only a minimum contribution of $25 per month.
  • Defer taxes: All RRSP contributions reduce income tax paid by employees. Investment earnings grow tax-free until withdrawn.
  • Spousal RRSP: If offered in your plan, the higher earner makes the RRSP contributions to get the larger tax break. At retirement, the lower earner makes the withdrawals from the spousal RRSP at a lower tax rate.
  • Immediate tax refund: tax is not deducted from the contributions made to your retirement
  • Deductions are made at source: plan contributions are taken directly from payroll before an employee has the chance to spend it elsewhere.
  • Employer contribution: depending on the features of the plan in effect, the employer may contribute to the plan.
  • Access to a full range of investment options: experienced fund managers and asset allocation portfolios focusing on employees’ personal preferences for Security, Conservative, Balanced, Dynamic, Energetic or Aggressive portfolios.Okanagan Retirement Plan

Accumulation Plans

Accumulation plans are plans in which the level of retirement income is not known in advance. It will depend on the level of contributions made to the plan and the return on those contributions.

There are several types of money-accumulation plans:

  • Group RRSP
  • Defined Contribution Pension Plan
  • Deferred Profit Sharing Plan (DPSP)

Group RRSP

A group RRSP is a collection of centrally administered RRSPs that offer members attractive group rates. The member makes tax-deductible contributions that accumulate in a taxsheltered fund. The amounts invested in an RRSP are not locked in, which means they can be withdrawn at any time. In addition, members make their own investment decisions. Contributions are deducted directly from member salaries, thereby providing an immediate tax deduction and a higher longterm return, since every contribution is invested the moment it is received.

The advantages of a RRSP:

  • Employers can match employee contribution based on an amount or a percentage if they choose.
  • Members decide for themselves how much to contribute. There is no minimum investment requirement or limit on inter fund transfers.
  • Lump sum contributions and transfers from other plans, including locked-in funds, are permitted.
  • Members can contribute to RRSPs in their spouses' names.
  • Members benefit from a wide variety of Investment Options and fund manager investment strategies.
  • Members have access to a complete range of Services to assist them in developing a retirement plan and monitoring its progress.

Defined Contribution Pension Plan (DCPP)

In a DCPP, the employer and employee make contributions that are tax deductible and accumulate on a tax-deferred basis. The administrator of the plan is required to offer a wide variety of investment funds to make the retirement fund grow. In most cases, members provide their own investment instructions for the amounts contributed on their behalf. The funds accumulated in a DCPP cannot be withdrawn before the member retires and must be used to purchase an annuity.

These plans are generally better suited to employers who are concerned with assisting their employees in building an income for retirement.Okanagan Retirement Plan

The advantages of a DCPP:

  • Expert advice on plan design and on establishing an investment policy, where applicable
  • All documentation as required by law
  • Information meetings with the plan sponsor and plan members
  • A wide variety of investment options and fund manager investment strategies
  • A complete range of services to assist members in developing a retirement plan and monitoring its progress

Deferred Profit Sharing Plan (DPSP)

A Deferred Profit Sharing Plan is a savings plan in which an employer distributes a portion of company profits to some or all of his or her employees. Employees cannot contribute to the plan, but they can combine it with other plans offered by the employer that are eligible for salary contributions. Employer contributions are not locked-in until retirement, which means that employees can withdraw all or a portion of the contributions after two years of participation or less, depending on the employer's specifications. Most of the time, employees make their own investment decisions for the amounts that are deposited on their behalf.

  • This is a very flexible plan for the employer, since it does not involve a permanent financial commitment and the employer does not have to contribute during a financial year in which the business suffers a loss. The advantage of a DPSP is that it provides incentive for employees to work towards the goals and the success of the company. It is directly linked to a company's profit, and money is put towards employee pensions.
  • In addition, deposits and fees are tax-deductible as operating costs and, like RRSPs, deposits and investment income are tax-sheltered.

Locked-In Retirement Account (LIRA)

A locked-in retirement account, also known as a locked-in RRSP, is an investment tool specially designed to receive the amounts acquired under a pension or retirement plan. When workers leave their jobs, the locked-in amounts accumulated in their pension plans can be transferred to a LIRA. As with an RRSP, this financial tool allows a plan member to accumulate income on a tax deferred basis. Unlike an RRSP, however, funds cannot be withdrawn from a LIRA prior to retirement. In addition, a LIRA must be converted into an annuity, Life Income Fund, or other type of retirement instrument no later than December 31 of the year the member turns 69. A LIRA is a good add-on to a group RRSP to consolidate one's savings for retirement.