Group Retirement

Why Group Retirement Plans are good:

  • An added incentive for new employees to join a company, especially if the company will  match contributions
  • Contributions automatically taken from pay creating a convenient and reliable method of saving for retirement with a great tax incentive
  • Lower investment management fees – these fees occur in both individual and group investments; are charged on an annual basis but broken down by month; in a group situation may be considerably cheaper.
  • Dollar cost averaging because of multiple deposits – regular deposits of a given amount of money work to advantage when the market fluctuates – saving a lump sum and then investing funds all at once at the then cost base is not as profitable.
  • Education in investment strategies allow for greater growth – watching current events and being aware of how they will affect funds, (i.e. oil after a major oil leak) and studying the different investment managers , company buy-outs, will have an effect on the success or failure of investment strategy.

Information we need for a quote:

  • Plan design including company’s participation
  • Number of participants
  • Gross payroll

Defined Benefit Plan (DBP)

Employer promises a specified monthly benefit on retirement that is predetermined by a formula based on the employee’s earnings history, tenure of service and age, rather than depending on investment returns. It is ‘defined’ in the sense that the formula for computing the employer’s contribution is known in advance.

The most common type of formula used is based on the employee’s terminal earnings. Under this formula, benefits are based on a percentage of average earnings during a specified number of years at the end of a worker’s career.

It is typically funded exclusively by employer contributions.

Defined Contribution Plan (DCP)

Contributions are paid into an individual account of each member. They are invested and the returns on the investment are credited to the individual’s account. On retirement, the member’s account is used to provide retirement benefits, sometimes through the purchase of an annuity or Life Income Fund (LIF).

Money contributed can either be from employee salary deferral or from employer contributions.

Investment risk and rewards are assumed by each employee, not by the employer.

Registered Retirement Savings Plan (RRSP)

Employees make contributions, as they wish, through a schedule of regular payroll deductions. The employee can decide the size of contribution per year and the employer will deduct an amount accordingly and submit it to the investment manager selected to administer the group account.  The contribution is then deposited into the employee’s individual account and invested as specified. The employee realizes the tax savings immediately, instead of having to wait until the end of the tax year.

Registered Education Savings Plan RESP)

A parent, friend or family member can start putting aside money for a child’s post-secondary education in a tax deferred program.

Tax-Free Savings Account (TFSA)

Contributions are made with after-tax dollars but withdrawals are tax-free. Any withdrawal from the account creates an equal amount of contribution room for the future. 
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