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As a business owner one of the first questions you should ask is why should you consider establishing a group plan. While a group RRSP does involve additional administration, it also offers several benefits:
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Group plans offer an effective way to save. Many people walk into their bank just before the annual RRSP deadline to invest in their annual RRSP. This can create a cash strain, and it is often difficult to take advantage of your maximum investment limit when you are making a single, annual payment. A group RRSP creates an easy way to save, as it is often easier to have a small amount of money deducted from each pay cheques than it is to make a large payment once a year.
- Group plans help you select the best investment options. Another advantage to the regular payments into an RRSP is that many plans will include individual consulting to determine the best investment options for each employee. In contrast, many people who invest at the last minute do so at a financial institution they are familiar with, and they select an investment product based on convenience rather than fund performance and their specific investment profile.
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Group plans have immediate tax benefits. The major difference between an individual and group RRSP is that you get an immediate tax benefit with the group RRSP. That's because there is no need to withhold tax at source, which results in an immediate tax benefit for participating employees. Rather than waiting for a refund tax return at the end of the year your employees will immediately stop paying tax on the amount of their pay that is invested in the RRSP.
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Group plans are employee owned. With a group RRSP there is no question of the ownership of the money. The portion that the employee contributes is 100 per cent owned by the employee and he or she can do whatever they want with it. They can take it with them if they leave the employer. Most plans also allow a transfer to another RRSP even during the time that the employee is still at the same employer. There may, however, be some lock-in restrictions or provisions under transfer amounts that are contributed by the employer.
SOURCE: CANADAONE MAGAZINE
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