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Posted by Jimmy Carbonneau, Group insurance and group annuity plans advisor, October 23 2015
Group Retirement Savings Plan
Will Your Employees Have Enough Money at Retirement?

Although we all agree with the fact of saving for retirement, a very small proportion of the population is taking steps to adopt a clear retirement plan and realistic goals. Based on the current life expectancy, we will spend on average 20 years in retirement. It’s almost a quarter of our life! Therefore, it is important to support your employees to avoid surprises at retirement and this article will help you to know how. 

Offering a group annuity plan (group RRSP, defined contribution pension plan, VRSP, etc.) to your employees proves to be a very effective tool to help them accumulate enough money for retirement. However, it is important to inform your employees so that they can achieve their goal.

We encourage all employers to provide retirement planning sessions to their employees regardless of their age. These sessions are generally included in the plan fees and thus represent no additional cost (for both employer and employees).

Establish an Adequate Retirement Goal

It is estimated that a person needs about 70 % of its gross annual income at retirement to maintain his/her standard of living. Obviously, this percentage may vary according to people’s situation (in couple, divorced, with/without children at home, etc.).

To meet the financial needs at retirement, governments provide certain benefits:

  • Pension from the Régie des rentes du Québec (RRQ)
  • Payable from age 65 (or reduced from age 60)
  • Old Age Security pension
  • Payable from age 65 (67 for those born in 1963 or after)

However, these benefits are insufficient for the vast majority of employees to maintain the same standard of living. For an employee with a salary of $ 60,000 at retirement, these benefits will replace only 47 % of the needs. In order to compensate for the lack, employer’s pension plans and personal savings should be used.

Thus, the same employee will have to accumulate nearly $ 412,000* at age 65 to reach the 53 % missing. It is important not to underestimate the effort required in order to accumulate this capital. The table below shows the annual required contribution (as a % of salary) to accumulate this capital by starting contributing from age 20, 30, 40 and 50:

Contributions Starting Age

Required Annual Contribution (as a % of salary)

to Accumulate $ 412,000* at Age 65

Age 20


Age 30


Age 40


Age 50


*Results are given in today’s dollars and are before taxes. An annual inflation rate of 2.5% and an annual rate of return of 5.0% have been assumed. It is estimated that all savings will be exhausted at age 90.

We can easily see that it is better to start sooner than later. Indeed, an employee starting saving from age 50 rather than age 20 will have to contribute eight times more annually in order to accumulate the same amount. This should convince most people!

When should you apply for your retirement pension?

Retirement Income Simulation Tools

In recent years, pension simulators have multiplied. They have also been improved, providing more precise results and covering more factors.

If you already offer a pension plan to your employees, they normally have access to a retirement income simulator directly from their personal access to the service provider’s website (insurance company, bank, etc.). If you do not offer such a plan, the retirement income simulator from the RRQ’s website (called SimulR) is very effective and user friendly.

In order to provide you with the necessary tools for retirement planning of your employees and a competitive group annuity plan that will meet the needs of your company and your employees, please contact one of our group annuity plans specialists 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