Registered Retirement Savings Plan
This an employer-sponsored retirement savings plan, similar to an individual RRSP, but administered on a group basis by the employer.
Contributions are made by pay-roll deduction, on a pre-tax basis, through a Group RRSP administrator. Employee contributions are often matched by the employer (typically to a maximum of 3-5% of earnings). However, contributions by the employer are not mandatory. Contributions by the employer are taxable as income to the employee.
Advantages of a group RRSP compared to an individual RRSP:
- Payroll Deductions method of employee contributions
- Immediate tax relief to employee
- Smaller or no administrative costs
- Minimal government reporting
- Not subject to provincial pension regulations, therefore flexible in terms of employee eligibility and contribution levels
- Lower minimum deposits
- Income splitting is available through spousal contributions
- May offer enhanced RRIF and annuity rates at retirement
Disadvantages of a group RRSP compared to an individual RRSP:
- Group plan may have limited investment options
- Employer contributions are a taxable benefit to employees
- Plan may be cancelled at any time by employer
- Employer may limit an employee’s ability to withdraw funds
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