Employee and Employer Group RRSP Advantages – Understanding How a Well-Designed Plan is Easy and Cost Effective to Manage
Having a well-designed RRSP group savings plan for your business will provide many benefits for both your business and your employees. A group savings plan is one of the best ways an individual can properly save for their retirement plan.
Offering group RRSPs and pension plans will help make your business an attractive place to work. It will help your company gain qualified employees and retain them long-term. People want to save for their retirement and they want to do so in a way they can afford without causing noticeable increases in monthly expenses. RRSP plans are an excellent retirement planning option for many people, regardless of their current earnings. Well-designed RRSP plans will allow the employee the ability to save consistent amounts of money over a long period of time. It’s a safe and proven model that has helped many Canadians meet and exceed their retirement goals.
Employers care about the well-being of their staff and offering a strong RRSP saving plan is an excellent reward for years of loyal service. The value it provides can offset pay increases and decrease the amount needed for initial starting salaries. Attracting strong talent is a challenge that many companies face daily, having a retirement plan in place will provide an excellent and competitive recruitment tool. When designed properly, the cost and management of a plan is fairly minimal.
In addition to establishing a concrete savings plan, an RRSP plan provides many tax benefits for its members. Many people choose to have their contributions automatically deducted off their paycheque. This allows the user the ability to have contributions invested on a before-tax basis and provides immediate tax relief, meaning you will enjoy the savings without needing to wait until income tax season.
Many enjoy the low amount of effort needed to manage their RRSP plan. Money is transferred directly from the employee’s pay before they even have a chance to notice it missing.
The short term and long term perks are great. It’s estimated that over 50 percent of people find their tax savings are equivalent to a 2 percent pay increase. Most company-run RRSP saving plans include some form of employer matching which will typically range from 2% to 6%.
Despite the fact the employee is essentially getting “free money” from the company they work for; it’s actually surprising how many do not utilize this benefit. Some younger workers are hesitant to invest in an RRSP savings plan because they are not thinking of their long term retirement goals. This is a common mistake that many young are making every day. The sooner an employee starts contributing to an RRSP the better they will be rewarded long-term. Even with minimal contributions, a younger worker will see a much greater return on investment by beginning their plan at a younger age. The power of compounding can be truly amazing.
A lack of awareness and understanding of how RRSPs actually work may be the biggest reason for this challenge. It’s important for employers to partner with an investment provider who is willing to educate each member of a team on how RRSPs will benefit them. It’s important that people understand the lack of money that government benefits provide for retirement and the importance of adding more funds. Time is a member’s best friend when it comes to an RRSP savings plan. There is strength in numbers when it comes to group plans, more enlisted workers provides an employer with strong buying power and more competitive rates. The stronger buyer power will equate to lower fees on running the investments and typically group plans have many free resources at plan members disposal.
There are many elements to consider when designing a group savings plan. It’s important to find the right one for your business and your employee needs. At Tanner Financial Services, we’ve been designing RRSP group plans for GTA area businesses since 1998. We take a lot of pride in partnering with our clients to find the perfect solution for the unique needs of their business. Speak to one of our experienced investment and insurance advisors today to get started.