Should you invest in a group retirement plan?

Lucky you! Your organization has put together a few group retirement plans to help you save. Some of them look surprisingly familiar—like a Registered Retirement Savings Plan (RRSP) or a tax-free savings account (TFSA). But why would you put your money in a group plan when you can get the same thing from your bank? Because your group plan offers all the same benefits—and more.

Individual retirement plans versus group retirement plans

Individual plans—like RRSPs or TFSAs—are investment accounts you set up directly with a financial institution of your choice. They can be important parts of your saving strategy, whether you’re saving for your retirement or for other financial goals.

Group plans—like group RRSPs or group TFSAs—are investment accounts set up by your employer or another organization you’re a part of. And they have extra benefits that can supercharge your strategy no matter what you’re saving for. 

What are the benefits of an individual retirement plan?

Some of the best things about saving with a TFSA are:

  • Your unused contribution room carries over to the next year.
  • Your unused contribution room goes up by any amount you take out the year before.
  • You don’t pay tax on any money while it’s in the plan.
  • You don't pay tax when you take the money out.

Some of the best things about saving with an RRSP are: 

  • Your contributions lower your taxable income.
  • Your unused contribution room carries over to the next year.
  • You don’t pay tax on any money while it’s in the plan.
  • You’ll likely pay less tax when you take the money out in retirement.

What are the benefits of a group retirement plan?

A group plan has all the same benefits as an individual plan, plus more:

Pay yourself first

A group plan allows for regular, automatic contributions that come straight off your pay, which means you stay on track for your goals without having to remind yourself to save.

Pay less tax when you get paid

When RRSP contributions come straight off your pay, they’re taken before your income tax is calculated, which means you get an immediate tax break. (TFSA contributions will always be taxed up front, but that’s what allows you to take the money out tax free later.)

Pay lower fees

A group plan usually offers more competitive fees than an individual plan, which means more money stays invested for your future.

Save your employer’s money too

Many employers offer to match your contributions, putting money in your plan every time you do. If your employer matches your contributions, do your best to make the most of this opportunity to supercharge your savings.

Do employer contributions affect your contribution limits?

Yes. All contributions to your group plans count toward your CRA limits, whether they’re made by you or your employer. 

Are employer contributions taxable? 

Yes. The amount your employer puts in your group plan each year will appear on your T4, and you’ll report it when you file your taxes. The good news—for group RRSP contributions at least—is that you'll also get a contribution receipt for your employer's contributions, which should help lower your taxable income.

What happens to the money in your group retirement plan if you leave your organization?

While leaving a pension plan can be more complicated, when it comes to group RRSPs and TFSAs, your money leaves with you. Most plans allow you to:

  • Take your money out by cheque or direct deposit
  • Move your money to a new group retirement plan if you have one
  • Move your money to an individual retirement plan
  • Move your money to a group plan you can join on your own—something like the Manulife Personal PlanTM or a group retirement income plan

Can you move other savings into your group plan?

Absolutely! Consolidating your savings can be a great way to make your retirement planning easier. Gather your savings—from all your financial institutions—into your group plan and you just might find yourself enjoying even lower fees, greater rewards, and a bit more time back in your day. 

Is a group retirement plan right for you?

Group plans have a lot to offer. There’s a good chance investing in one is a great decision for your money and your future. Ask for advice from an expert you trust to help you decide whether the benefits they offer are right for you. 

If you’ve already joined a group retirement plan but you’re not sure which one, check your statement. If you want to learn more about which plans your organization offers, check your enrolment material, or talk to your plan administrator.

The commentary in this publication is for general information only and should not be considered legal, financial, or tax advice to any party. Individuals should seek the advice of professionals to ensure that any action taken with respect to this information is appropriate to their specific situation.