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Posted by Jimmy Carbonneau, Group insurance and group annuity plans advisor, October 28 2015
Group Retirement Savings Plan
Don't Forget to Contribute to Your RRSP

« Don’t forget to contribute to your RRSP », that is what we used to say in the good old days!

How many times have you heard this phrase throughout your life? Even though it seems obvious for most of us, this approach should be reconsidered today! This article will help you to understand why.

This outtake changed last April with the deposit of the 2015 federal budget. The Tax-Free Savings Account (TFSA) limit was increased from $5,500 to $10,000 in 2015.

The RRSP, a Magic Solution?

Even though each situation is unique, the Registered Retirement Savings Plan (RRSP) is usually more suitable for people whose tax bracket at retirement is lower than in their working years.

However, the RRSP brings an issue undervalued by many people. Upon retirement, the withdrawals made out of the RRSP must be added to the income. Some governmental benefit payments could be affected by those withdrawals since these are tied to the income at retirement.

Hence, in 2015, as soon as a person receives an annual income of $71,000, the Old Age Security (OAS) pension is reduced, and will completely disappear if the annual income is $115,000 or more.

The Guaranteed Income Supplement (GIS) provides a non-taxable additional benefit to people receiving the OAS pension and with low income (under $17,000). However, once this threshold is reached, the pension is drastically cut.

Even though the future is unpredictable, we need to remember that a person expecting to have an annual income lower than $24,000 or above $71,000 should seriously consider contributing first to a TFSA, and then to an RRSP, if applicable.

And What About the VRSP?

You have certainly heard about the Voluntary Retirement Savings Plan (VRSP) initiated by the Government of Quebec. The VRSP will have to be offered by all businesses with five employees or more over the next years, if no other retirement plan is offered.

The VRSP is far from being a miracle solution for employees: limited funds offering, locking-in provision of employer contributions, enrolment follow-ups by the employer, etc. Furthermore, even if the pricing is restricted by law, a group RRSP or group TFSA may be much less expensive for certain groups and a more suitable solution. Should the employer offer such a plan, the VRSP does not have to be implemented.

Selecting the right pension vehicle is not an easy task. Several factors must be considered in order to make an informed decision. To guide you through the selection of appropriate pension vehicle for your company and your employees, we invite you to contact one of our retirement experts today.


Jimmy brings overs 20 years of experience in pension plans. After starting his pension career at the Ontario Teachers’ Pension Plan, he worked as DC Consultant for a large actuarial firm and two insurance companies before joining AGA. With his extensive pension experience, he has developed an acute expertise in the selection, the design and the implementation of pension plans. Jimmy provides his clients with both expertise and insight on their employee benefits.
Jimmy Carbonneau, Group insurance and group annuity plans advisor