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Group RRSP's and Pension Plans

Implementing a group retirement plan is one way to provide a competitive compensation package for your employees. You will not only help lessen their financial worries about retirement, but also help your company become a more attractive employer.

Members' contributions in a Group RRSP can be deducted from their taxable income, reducing their income tax payable. The growth within the plan (including interest, dividends and capital gains) is sheltered from tax. When money is withdrawn from a group RRSP at retirement, it is taxed as income although usually, at a lower tax rate.

Additionally some plan sponsors allow RRSP savings to be used to purchase a home though the Home Buyers' Plan (HBP) or to attain post-secondary education through the Lifelong Learning Plan (LLP).

A Group RRSP is not subject to pension standards legislation; however the plan must be registered with the Canada Revenue Agency.

A Registered (Defined Contribution) Pension Plan (RPP) is a tax deferred savings vehicle that allows contributions to accumulate tax-free for later use as retirement income.

Contributions made and fees paid by the plan sponsor to the RPP are a tax deductible expense to the plan sponsor. Employee contributions are reported as a Pension Adjustment and deducted from your RRSP contribution room.

Earnings in the RPP plan will accumulate tax-free for the member until retirement. The retirement income accumulated depends on the amount of money contributed and the performance of the investment vehicles chosen by the member.

RPPs are subject to applicable Federal and Provincial legislation, and must be registered with Canada Revenue Agency (CRA) and under pension benefits legislation maintained by all provinces.