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Posted by Jimmy Carbonneau, Group insurance and group annuity plans advisor, January 30 2019
Group Retirement Savings Plan
RRSP Contribution: The Time is Right!

RRSP Contribution

As we enter a new year, many people are focusing on paying off their Holiday bills, but financial institutions are starting their push to encourage investors to make their RRSP contributions. Why are they spending so much energy at this time of year? Simply because RRSP contributions made during the first 60 days of the year can be deducted from the previous year’s income, entitling you to a tax refund when you file your income tax return. This is called the “RRSP season”.

If you have some money aside for an RRSP contribution, now is the time to make one!

Substantial tax savings!

By making an RRSP contribution, you will get a substantial tax refund when you file your return. For example, if you make a lump sum contribution of $1,000 to a group RRSP, the government will give you a refund of about $400.

However, when you contribute regularly to your employer-sponsored group RRSP through payroll deductions, you will get an immediate tax refund instead of waiting until the end of the year. For example, if you contribute $50 per pay, the full $50 amount will be deposited into the group RRSP but your net pay will only be reduced by approximately $30. The $20 difference is your immediate tax saving. No need to wait until you file your income tax return!

Prioritize the retirement plan offered by your employer!

If your employer gives you the opportunity of contributing to a group RRSP or a retirement plan, you should seriously consider this alternative instead of contributing to an individual RRSP at your bank or credit union. Why? Among many reasons, the simple fact that you could save thousands of dollars in management fees over the span of your career should convince you. As management fees are already subtracted from the published returns, you may think you are not paying any. But fees are always part of the picture!

Management fees for a mutual fund within an individual RRSP often range from 2% to 3%. In a group RRSP, such fees can be lowered by 50% or more. If you contribute $3,000/year for 30 years and pay 1.5% rather than 2.5% in fees, you will accumulate $25,000 more, for comparable returns. That’s a lot of money saved!

Can I take advantage of the HBP with a group plan?

Yes, of course! Group RRSP members can take advantage of the Home Buyers’ Plan (HBP) to access the real estate market with greater ease. You are thus eligible to a maximum tax-free withdrawal of $25,000 for the purchase of your first home.

Smaller, but more frequent RRSP contributions!

To save enough for your retirement, you need a strong savings plan based on regular contributions. This makes budgeting much simpler. Indeed, contributing $50 every 2 weeks is much easier than making a $1,300 contribution at year end.

It has also been demonstrated that it is a lot easier to save when the amount is deducted directly from your pay, before it is deposited in your bank account. This is another advantage of group RRSPs.

By spreading your RRSP contributions over the year, and thanks to the income tax saving at source, your potential return will be much higher. Indeed, when you make a contribution on each pay, this amount will be invested immediately on the markets and will potentially generate a return.

The right time to review your strategy!

Take this RRSP season as an opportunity to review your RRSP contribution and investment strategy. Prefer a group RRSP over an individual one, as group plans provide several benefits.

It is also important to determine the right contribution amount. To do so, you must make a budget, assess your current savings, project your future income and determine your retirement needs. There are several well-designed tools available to assist you in this task. To get a clearer picture, we invite you to read our article “Will your employees have enough money at retirement?”.


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