1-888-601-9980
- Group RRSPs are employer-sponsored retirement savings plans that allow employees to contribute a portion of their salary directly from their paycheck into a retirement account
- Some of the major providers of group RRSPs in Canada include Sun Life, Manulife, and Canada Life, and employers often add other benefits to these RRSP plans, like investment tools and matching contribution benefits
- Although Group RRSPs allow flexible withdrawals, they will be subject to taxes, and taking money out early means you lose additional contribution room permanently, which can affect retirement savings goals
- When employees leave the company, their Group RRSP must be transferred to a personal RRSP to allow a smooth transition of their retirement funds
- What is a group RRSP?
- Is a Group RRSP better than an individual RRSP?
- How does a group registered retirement savings plan work?
- Why do employers offer group RRSPs?
- Which are the top group retirement savings providers in Canada?
- What are the investment options in group retirement plans?
- What happens to my group RRSP if I change jobs?
- What are the tax advantages of participating in a group RRSP in Canada?
- How to get maximum benefits from a group registered retirement plan?
- Frequently asked questions
A Group Registered Retirement Savings Plan (Group RRSP) is a workplace savings program in Canada that is offered through employers and helps employees build their retirement fund. Many Canadians may wonder how a group RRSP really works, and if this benefit is the right fit for their financial goals, especially after retirement.
In this blog, we’ll break down the ins and outs of group RRSPs, explore their benefits and limitations, and help you decide whether joining a group RRSP makes sense for your financial future.
Call 1-888-601-9980 to speak to our licensed advisors right away, or book some time with them below.
What is a group RRSP?
A Group Registered Retirement Savings Plan (Group RRSP) is a retirement savings plan set up by an employer for their employees. It works a lot like a regular RRSP, but with a few added benefits that come from being part of a group.
Your employer partners with a financial institution to offer the plan. As an employee, you choose to join the group RRSP, and once you’re in, a portion of your paycheque is automatically deducted and deposited into your Group RRSP account. These contributions are tax-deductible, which means your taxable income will be lower.
Is a Group RRSP better than an individual RRSP?
Both group retirement savings plans and individual RRSPs serve the same core purpose of helping Canadians save enough money for their retirement in a tax-advantaged way. However, they differ in how they’re set up, managed, and accessed.
A group RRSP is arranged through your employer and often includes helpful features like payroll deductions and matching contributions. An individual RRSP, on the other hand, gives you full control but requires more initiative.
Difference between a group RRSP and an individual RRSP
| Feature | Group RRSP | Individual RRSP |
| Set up by | Employer | Individual |
| Contributions | Via payroll deductions, which often include employer matching | Self-directed contributions with no employer matching |
| Fees | Usually lower due to group rates | Varies by provider; may be higher |
| Investment control | Limited to the options offered in the plan | Full control over investment choices |
| Ease of use | Automated and simple to maintain | Requires self-management and regular monitoring |
| Portability | Can be transferred when changing jobs | Always under your control |
How does a group registered retirement savings plan work?
If an employer is looking to start a group RRSP for employees, they should start by setting up a plan from a reliable provider. Next, the employees need to enroll themselves in the plan, choose their contribution amount, and set up automatic deductions.
Employers may even opt for matching parts or all of the contributions that have been chosen by the employee to give them added cash value growth. Lastly, the funds are invested and the savings is monitored by the provider until an employee decides to withdraw their funds upon retirement.
- Employer sets up the plan: An employer partners with a financial institution to offer the group RRSP
- Employees enroll and choose a contribution amount: Employees can decide how much of their salary to contribute. This is usually a fixed percentage of the salary, deducted on a monthly basis
- Automatic payroll deductions: The contributions are deducted directly from the employee’s gross pay before tax is applied
- Employer may match contributions: Some employers match part of what their employees contribute, usually up to a certain limit
- Funds are invested: The contribution is then invested in the investment option of your choice, available within the plan (e.g., mutual funds), enabling tax-deferred growth until retirement
Why do employers offer group RRSPs?
Group RRSPs aren’t just a perk for employees, they’re also a smart business move for employers. By offering this retirement plan, companies can attract top talent, strengthen their workforce, improve retention, and enjoy financial and reputational benefits.
- Attracting and retaining employees: Offering a group RRSP helps employers stand out in a competitive job market. It’s often seen as part of a strong benefits package that encourages employee loyalty
- Supporting employee financial health: Helping employees save for retirement can reduce financial stress, which may lead to improved morale, productivity, and job satisfaction among your workforce
- Tax advantages for the business: Employer contributions to retirement plans are tax-deductible, which can help reduce overall business taxes for employers
- Simplified administration: Group plans are relatively easy to set up and maintain, making it convenient for even small businesses to offer meaningful benefits
- Enhancing company reputation: Being seen as an employer that invests in its employees’ futures helps build a positive workplace culture and a strong brand reputation for a company
Which are the top group RRSP providers in Canada?
In Canada, companies such as Manulife, Desjardins, BMO, Canada Life, RBC, and Sun Life are the top providers of group RRSPs. These providers help businesses set up and manage retirement plans. They also offer flexible investment options, digital tools, and expert support to maximize group RRSP employer benefits.
- Desjardins group RRSP: Desjardins offers customizable group RRSP plans with strong online tools, low fees, and solid member education resources. Their plans simplify retirement savings for both employers and employees
- Manulife group RRSP: Manulife offers a wide range of investment choices, user-friendly digital platforms, and helpful retirement planning support. Their group RRSPs are ideal for businesses looking for flexible, scalable solutions
- BMO group RRSP: BMO provides competitive group RRSP plans with tools for financial understanding and employee engagement. Their offerings mostly serve small and mid-sized businesses that want to offer meaningful retirement benefits to their employees
- Canada Life group RRSP: Canada Life group RRSP plans meet different employer needs through the power of personalization. They also offer planning resources to help employees manage their savings effectively
- RBC group RRSP: RBC provides reliable and easy-to-manage group RRSP plans that integrate with payroll systems easily. Their nationwide presence makes them accessible to enterprises and small businesses across Canada
- Sun Life group RRSP: Sun Life offers group RRSPs with efficient reporting tools, financial wellness programs, and strong advisor support
What are the investment options in group retirement plans?
Group retirement plans in Canada typically offer a variety of investment options to suit different financial goals and risk tolerances. These may include mutual funds, target-date funds, and low-risk options like GICs or money market funds.
Equity and bond funds are also commonly available for those seeking growth or stability. Employees can usually select their preferred mix, allowing for a personalized approach to long-term retirement savings within the group plan.
What happens to my group RRSP if I change jobs?
When you leave your job, you don’t lose the money you’ve contributed to your group RRSP. However, any employer contributions may be subject to a vesting period—the minimum period of time that an employee must be employed at a company to completely own the employer’s contribution towards their retirement.
In Canada, most companies offering retirement benefits have a vesting period of a maximum of two years, meaning you must be employed with your existing employer for at least two years to avail their contribution to your RRSP account.
Once you’ve left your existing job after completing the vesting period, you usually have a few options:
- Transfer the funds to a personal registered retirement savings plan or another registered account to maintain the tax-deferred status. Transferring is typically the smartest choice if you want to avoid unnecessary taxes
- Leave the funds in the group registered retirement savings plan if the provider allows it. However, in this case, you won’t get new contributions as you’ve already changed jobs
- Withdraw the funds, which will be taxed as income
What are the tax advantages of participating in a group registered retirement savings plan in Canada?
One of the biggest advantages of participating in a group retirement plan is the group RRSP tax deduction. This benefit lowers your taxable income right away, giving you upfront financial relief. Here are some of the tax benefits of group RRSPs:
- Immediate tax savings: Contributions are taken from your pay before taxes are calculated, reducing your income tax automatically
- Group RRSP tax deduction: Every dollar you contribute lowers your annual taxable income, helping you keep more of your earnings for yourself
- Tax-deferred investment growth: Interest, dividends, and capital gains within the plan grow without being taxed, helping you build a substantial retirement fund
- Lower taxes in retirement: You’ll likely be in a lower tax bracket when you retire, so your withdrawals could be taxed at a reduced rate
Can I withdraw money from a group retirement savings plan before retirement?
Yes, you can generally withdraw money from a group retirement savings plan, especially if it’s a group RRSP, but there are a few important things to consider.
A group RRSP allows early withdrawals, but any amount you take out will be subject to withholding tax and must be reported as income on your tax return. This could bump you into a higher tax bracket depending on how much you withdraw.
Withdrawing early from your group RRSP will reduce your retirement savings. Also, the contribution room —the maximum amount an employee is allowed to contribute to their RRSP in a given tax year without facing penalties —is not re-added.
This means once you contribute a certain amount to your RRSP, you use up that portion of your lifetime RRSP limit, and even if you withdraw the money later, you cannot contribute it again. Hence, it’s best to consider withdrawing early from your group RRSP as a last resort.
How to get maximum benefits from a group registered retirement plan?
If you are looking to make the most out of your group retirement plan, make sure to contribute regularly and set up automatic deductions to never miss a payment. You should also increase your contributions annually to maximize cash value growth. Utilize the low fee structure of a group RRSP and continue to monitor your plan from time to time to ensure that your savings plan is up to date.
- Contribute regularly: Set up automatic payroll deductions to ensure consistent contributions. This will ensure that you are able to accumulate your desired amount into the savings plan
- Increase contributions over time: As your income grows, consider increasing your contributions to maximize your retirement savings
- Review the plan annually: Regularly assess your group retirement plan and make adjustments as needed to stay on track with your retirement goals
- Take advantage of low fees: Group RRSPs often have lower management fees than individual RRSPs, helping your investments grow more efficiently over time
- Review contribution room and limits: Monitor your annual RRSP contribution limit to avoid over-contribution penalties. Group RRSP contributions count toward your total RRSP room, so it is essential to monitor your limits regularly.
Frequently asked questions
Are contributions to a group retirement savings plan locked in?
Contributions to a group retirement savings plan, such as a Group RRSP, are not locked in. You can withdraw funds at any time, subject to withholding tax.
However, some employer contributions (like in a DPSP or pension) may be locked in depending on the plan type and vesting rules. It’s also important to note that your group RRSP contribution limit is set by the CRA each year.
Are employer contributions to a group RRSP mandatory?
No, employer contributions to a group RRSP are not mandatory in Canada. Some employers choose to match a portion of employee contributions as a benefit or incentive, while others may offer a plan without any employer contributions at all. When available, employer matching can significantly boost retirement savings, so it’s a good idea to take full advantage if offered.
Can I contribute more than the employer-matched amount to a group RRSP?
Yes, you can contribute more than the employer-matched amount to a group RRSP, as long as you stay within your annual RRSP contribution limit set by the Canada Revenue Agency (CRA). Contributing beyond the employer match can help you maximize your retirement savings and benefit from additional tax advantages.
However, it’s important to monitor your contributions carefully to avoid exceeding your limit, as over-contributions may result in tax penalties.
A Group Registered Retirement Savings Plan (Group RRSP) is a group benefits plan offered by Canadian employers. It allows employees to contribute to a retirement savings account via payroll deductions, and employers usually pair it up with matching contributions. Unlike pension plans, group RRSPs are voluntary and employee-directed. Group RRSP contributions lower an employee’s taxable income, and the savings fund grows tax-deferred. Group RRSPs can be beneficial for both employers and employees. While employers benefit from improved talent retention and solid company reputation, employees enjoy low fees, automatic savings, and immediate tax breaks to secure their financial future. However, early withdrawals from group RRSPs may be taxable. Some of the leading group RRSP providers include Sun Life, Manulife, and Canada Life, offering digital access and investment options.
