Pensions and Retirement Savings

Pensions and other retirement savings plans are not required in Ontario, but if employers do provide them, most plans must be registered with the Financial Services Commission of Ontario (FSCO).  Pension plans are heavily regulated.  Legislation and issues around retirement savings plans are complex, and beyond the scope of this site.  The following provides some basic information, and useful links to help you do the research necessary before deciding on a retirement savings option.

Managing and administering your plans can be outsourced, and some of the links below refer to companies that will do this for you.

Pension Plans:

There are two types of registered pension plan: Defined Benefit, and Defined Contribution. 

In a Defined Benefit Pension Plan, the employer commits to providing a pension of a defined amount, based on a formula (typically employee’s age and length of service at retirement).  

In a Defined Contribution plan, the employee and/or the employer make regular contributions to the employee’s pension plan, and the employee decides how to invest the money within the options available in the plan.  At retirement the employee can use the funds to purchase a retirement plan (annuity, LIRA, etc.).

For the self-employed, or employees without a company pension plan, a pooled registered pension plan (PRPP) may be an option.

Deferred Profit Sharing Plans (DPSP’s):

In a DPSP, the company contributes to a plan on the employee’s behalf.  Plans must be registered with the Canada Customs and Revenue Agency (CCRA). 

Group Registered Retirement Savings Plans (GRRSP):

Employers may set up GRRSP’s on behalf of employees. Contributions made by payroll deduction are made on a pre-tax basis. GRRSP’s do not have to be registered with the Financial Services Commission of Ontario (FSCO). 

Tax Free Savings Accounts (TFSA):

Tax Free Savings Accounts allow Canadians to earn tax-free investment income, and contributions are not tax-deductible.  Employers may set up company plans, and make matching contributions.   Contributions made by payroll deduction are made on a pre-tax basis.

USEFUL LINKS: (for information purposes only: I do not endorse any organization)

Canada Revenue Agency PRPP information: http://www.cra-arc.gc.ca/tx/ndvdls/tpcs/prpp-rpac/menu-eng.html

Employee Benefit Advisors (E.B.A.I.) “Canada’s Leading National Association of Independent Employer Benefits Advisors” (my thanks to Gary Winch, of The Winch Group, Burlington, Ontario for this information): http://www.benefitsadvisors.ca/index.php/main/members

AON/Hewitt Benefits Consultants: http://www.aon.com/canada/products-services/human-capital-consulting/consulting/health_and_benefits.jsp

Hay Group Benefits Consulting: http://www.haygroup.com/us/services/index.aspx?id=2512

Mercer Health and Benefits Consulting: http://www.mercer.com/solutions/health-and-benefits-consulting

Towers Watson Benefits Consulting: http://www.towerswatson.com/services/Health-and-Group-Benefits

Greenshield Canada: http://www.greenshield.ca/english

Manulife: http://www.manulife.ca/canada/canada1.nsf/public/homepage

Sun Life: http://www.sunlife.ca/

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