Group Pension Services in Canada
As a provider of group pensions services in Canada, our group pension plans (also known as Group Pension Schemes) are workplace pensions run by an employer for the employees of a business. At Nour Private Wealth (NPW), we offer convenient retirement savings options to companies in Canada with full-time employees. In addition, business owners will have access to various flexible retirement savings solutions.
What Is a Group Pension Scheme?
A group pension scheme is a retirement plan that requires both employees and employers to make contributions to a pool of funds set aside for each employee’s future benefit. Employers and employees usually make matching contributions each month, with the employer providing their portion as part of the remuneration package, and the employee making theirs as a deduction from their paycheck. Although a group pension scheme is a company benefit offered to all employees (or all of those who opt in, at least), each employee essentially has their own private plan with the provider once they agree to join the scheme, interacting directly with the pension administrator as an individual client. Group pension schemes are beneficial for both employees and employers. For employees, the advantage is obvious: short-term contributions for long-term savings and money set aside from a comfortable retirement. However, these schemes are wise investments for companies too. They provide a way to attract and retain staff, help to reduce an employer’s tax burden, and boost and incentivize productivity.
Why Should You Have a Group Pension Scheme?
A group pension scheme is a desirable benefit for staff and prospective employees, but it is highly beneficial for the companies who offer them as well. There are three key reasons why business owners should operate group pension plans.
1. Attract and Retain The Best Talent
Job seekers look for employers that can provide the best combination of remuneration and benefits. If you, as an employer, offer the best salary and benefits, you are sure to attract the best available talent. You can also offer these rewards incrementally. Perhaps you would prefer to make the pension available only after an employee has been at the company for a certain period of time, or has risen to a certain position. You could offer to increase company contributions to an individual’s pension plan after a certain length of service. In this way, benefits such as group pension schemes can offer a way to attract employees to you, and can provide an incentive for loyalty, long service and excellent work.
2. Easy Implementation
It might take a lot of time and careful consideration to choose a group pension scheme that best suits your company, but once you have made the decision, the plans are easy to implement and manage. There is little or no administrative cost for the company itself. When employees opt in, they simply need to fill in the necessary forms and then can usually communicate directly with the scheme providers and administrators when they have questions.
3. Tax Savings
Offering pay increases is probably the best way to retain good employees and reward them for work well done. It is a great morale booster and a way to enhance productivity. However, every increase in a company’s total salary bill leads to an increase in the payroll-related taxes the employer will be expected to pay. This can be offset with a group pension scheme.
Having a group pension plan in place helps your employees to save money for their retirement, and it also offers employers a powerful tool to attract and retain great staff and enjoy some tax savings. On both sides, the benefits of the schemes can be realized with minimal effort. All the employee has to do is opt-in, surrendering a portion of their paycheck each month. Employers only need to choose the right plan and then entrust it to the pension plan provider to administer and manage.
What Do Employees Get From Group Pension Schemes?
If your employees wonder what long-term and short-term benefits they enjoy when they give up a portion of their paycheck to a group pension scheme, you can offer them the following compelling answers.
1. An Easy Way To Save For Retirement
Most people worry about whether or not they are setting aside enough money to enjoy their retirement. Group pension plans remove this worry. With a reasonable contribution each month, matched by the employer, they can build up a sizable nest egg with which to fund their lives once they stop working. There is no need to ponder the many choices with regard to investment and personal pension schemes. They simply opt in, pay their contributions, and then reap the benefits further down the line.
2. Reduced Taxes
Employee contributions to an employer-sponsored group pension plan are on a tax-deferred basis. This means that each employee’s taxable income is reduced by the amount they contribute to the plan. They will pay tax on this money later – when they withdraw it after retirement – but by then, being retirees, they will be in a lower tax bracket, paying less on each dollar they chose to contribute.
Tax is not only deferred on the contributions made, but on the interest and investment gains as well. This means that, no matter how much the employee’s money grows while it is invested in the plan, they will not have to pay any taxes on that growth, regardless of its value, until they begin making withdrawals from the scheme.
Take a look at our policy options below to see which one best suits your needs:
Voluntary Retirement Savings Plans (VRSP) (Quebec only)
A VRSP is a retirement savings plan that employers offer their employees to help them reach their retirement savings goals. It is a voluntary retirement plan, so both the employer and employee decide whether to contribute or not. If you are looking for help with a Voluntary Retirement Savings Plan in Quebec, contact one of NPW Wealth Advisors with any questions.
Pooled Registered Pension Plans (PRPP)
A Pooled Registered Pension Plan is a contribution-style retirement plan for employees and self-employed individuals who don’t have access to a workplace pension. As a result, PRPP members can benefit from lower administration costs. In addition, a PRPP’s investment options are very similar to those of other registered pension plans, so its members can take advantage of greater flexibility in managing their savings and achieving their retirement goals. As an added benefit, PRPPs are portable, so people can have the same plan even if they change jobs.
Defined Contributions Pension Plans
Employees and employers contribute a set amount into a pension plan each year with a defined contribution pension plan. The amount an employee receives when they retire depends on the amount paid into the pension and the fund’s investment performance. This plan is primarily funded by the employee (with a portion of their gross income), and employers can match the contribution if they choose to.
Registered Retirement Savings Plans (RRSP)
RRSPs are retirement savings plans and investment opportunities for employees and self-employed individuals in Canada. The money that is placed into an RRSP grows until it is withdrawn. Once it is withdrawn, it is taxed at the marginal rate.
Deferred Profit-Sharing Plans (DPSP)
A DPSP is a compensation plan that sees employers share part of their business’ profits with employees. With this plan, the amount is not immediately given to a beneficiary; instead, it is placed into a deposit account where it can grow without being subject to taxes. With this compensation plan, employees are generally allowed to decide how they want the money to be invested.
Non-Registered Savings Plans
If you have reached the contribution limits on your RRSP and/or your TFSA (Tax-free Savings Account), a non-registered savings plan is a way to contribute to your retirement savings. This option offers a higher rate of return than a bank account and lets you invest in investment funds to grow your investment. In addition, you can contribute through pre-authorized payments and withdraw funds whenever you need them.
Employee Share Ownership Plans
Also known as Employee Stock Ownership Plans, this employee benefit plan gives employees an ownership interest in the company they work for. Businesses use ESOPs frequently as a corporate finance strategy to align the interests of their employees with those of their stakeholders. In addition, tax benefits are available to the sponsoring company, selling shareholders, and participants of this plan.
Investment Only Services for Defined Benefit Plans
With a Defined Benefit Plan, eligible employees are guaranteed income for life when they retire. The retirement benefit amount for each participant is based on various factors, including the employee’s salary and years of service.
Individual Pension Plans
Canadians can save for retirement in a tax-efficient way through individual pension plans (IPPs). IPPs are Defined Benefit Pension Plans with a one-person maximum that allows the member to accrue retirement income on a tax-deferred basis.
If you would like to learn more about the various group pension services/plans and individual pension plans offered by NPW, contact us today!
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