The Untapped Potential of Group Retirement Plans for Canadian Business Owners
When business owners think about retirement planning, they often picture individual contributions to RRSPs, TFSAs, or corporate pension plans for larger corporations.
But what if there were a better way to build retirement security for both business owners and employees?
Group retirement plans are becoming an increasingly powerful tool for Canadian small and medium-sized enterprises. These plans go beyond financial benefits—they have the ability to create a unique culture of support and shared growth within an organization.
While large corporations have long offered retirement plans as part of their benefit packages, many medium-sized businesses in Canada have struggled with the costs and complexities of setting up similar plans. However, recent developments in group retirement options make it more accessible than ever for business owners to offer retirement plans that not only boost employee retention and morale, but also enhance financial security for all involved.
Group Retirement Plans: More Than Just Employee Perks
At first glance, group retirement plans may seem like just another employee benefit; but, for business owners, they represent much more than that. They’re a way to create loyalty, increase productivity, and improve workplace morale.
By offering employees access to a retirement savings plan—whether it’s a Group RRSP, a Defined Contribution Pension Plan (DCPP), or a Deferred Profit Sharing Plan (DPSP)—business owners can demonstrate their long-term commitment to their team’s future. This can significantly enhance employee retention, particularly in industries facing talent shortages.
Group retirement plans also often come with lower fees and better investment options than individual plans. Business owners, many of whom face the same concerns about retirement as their employees, may also participate in the group plan, boosting their own retirement savings alongside their staff.
The Financial Benefits for Employers
Canadian business owners have plenty of reasons to consider offering group retirement plans beyond the feel-good factor. First, the tax advantages are notable. Employer contributions to group retirement plans are typically tax-deductible, offering business owners a direct financial benefit.
Additionally, businesses that offer retirement plans often see increased employee productivity. Studies have shown that financial stress can decrease employee performance, and a solid retirement plan helps alleviate some of that stress. Employees who feel secure about their financial future are more likely to focus on their work and less likely to seek opportunities elsewhere.
Lower employee turnover means savings on recruitment and training costs, which directly impacts a business’s bottom line.
Levelling the Playing Field for Small and Medium Businesses
In Canada, the emergence of more flexible and scalable group retirement options means small and medium-sized businesses can now offer competitive plans without the significant administrative burden or cost. Solutions such as pooled registered pension plans (PRPPs) and multi-employer pension plans (MEPPs) allow businesses to join forces and create larger, more robust retirement savings pools.
By offering these plans, small businesses can compete with larger firms in attracting top talent, all while keeping costs manageable. The economy of scale that group plans offer results in **lower investment management fees**, which means more of the contributions go directly toward growing employees’ retirement savings.
Supporting Financial Literacy Through Group Plans
One of the most valuable, yet often overlooked, benefits of group retirement plans is the opportunity for financial education. Many Canadians struggle with understanding the complexities of retirement planning, and this lack of knowledge can lead to under-saving or poor financial decisions.
For business owners, offering a group retirement plan doesn’t just provide a financial benefit—it also allows employees to access educational resources through the plan’s providers. These resources can include workshops, online tools, and one-on-one consultations that help employees make informed decisions about their retirement.
A workforce that is more financially literate is a more stable one. Employees are more likely to contribute consistently and maximize their savings, creating long-term security for themselves and stability for your business.
Community Building and Employee Loyalty
Offering a group retirement plan also fosters a sense of community within your company. It signals that you, as a business owner, are committed to your team’s future. This shared sense of purpose can have a profound impact on company culture, creating deeper employee loyalty and engagement.
When employees see that their employer is investing in their long-term financial well-being, it builds trust. A retirement plan isn’t just a benefit—it’s a statement of shared goals and mutual respect. Employees feel valued, knowing that their financial future is being considered as part of the company’s overall success.
Why Group Retirement Plans Are a Smart Investment for Canadian Business Owners
Group retirement plans are a strategic tool for business owners: by offering these plans, you can foster a culture of financial literacy, build employee loyalty, and take advantage of tax savings and reduced costs. The result is a win-win: employees gain financial security, and your business gains a stable, productive, and engaged workforce.
Daryl Smith offers corporate planning alongside benefit solutions at Benefit Strategies. If you are interested in Group Retirement Plans for your business, contact Daryl today to schedule a discovery call: (780) 437-5070.
