Offering employees group RRSPs and pension plans help make your company an attractive place to work. Group RRSPs and pension plans signal to potential employees that your business is willing to help them financially plan for their future and their retirement.
Employer contributions to group RRSPs are generally based on how much the employee is contributing to the plan. An employer can match what the employee is adding to the plan on a dollar for dollar basis or management can kick in a percentage.
Employer group RRSPs and pension plans can be contributory (employees contribute to the plan) or non-contributory (employer contributes to the plan).
Both group RRSPs and pension plans have multifaceted aspects that make them more attractive to a company and its employees.
What is a Group RRSP?
A group RRSP is similar to an individual RRSP but is sponsored and administered by the employer. Group RRSPs help members of the plan save for retirement by deferring income tax on contributions. Interest collected on these funds, or dividends (or capital gains) are not taxable until withdrawn.
Many group RRSPs become part of payroll deduction, making it less financially stressful for employees to contribute on a yearly basis. Tax savings in these circumstances are realized immediately by the employee, not the end of the year, which is usually when employees paying individually into RRSPs would realize any tax advantages.