Workplace pension plans

For most Quebeckers, the income provided by workplace pension plans and personal savings completes the income provided by public plans. They are therefore necessary for people to maintain their standard of living in retirement.

Find out the advantages:

  • Employer's contribution. An employer who offers a pension plan sometimes pays a contribution as well, which represents an advantage that really pays off. Not joining a plan to which your employer makes contributions is like turning down free funds.
  • Payroll deduction. Generally, contributions can be automatically withheld from your pay, which makes it easier to save. It has been proven that people save more when they do not have to transfer amounts from their bank account themselves to a retirement savings plan.
  • Immediate tax savings. Your contributions are tax deductible, except those in a TFSA. In addition, your investment income accumulates tax-free! Your withdrawals, however, are taxable, except those from a TFSA.
  • Managing the financial risks associated with retirement. Since you will be able to save more for your retirement, your membership in a workplace pension plan could help you manage the main financial risks associated with retirement.
  • Advantageous management fees. The management fees are normally a lot lower in group plans than in individual plans. When you retire, small savings on management fees can represent several thousands of dollars.

Are you a member of your workplace pension plan?

Well done! Find out about all the specific characteristics of your pension plan and consult your statement. It is an essential tool to plan your retirement.

Workplace pension plans include:

  • supplemental pension plans (SPPs);
  • voluntary retirement savings plans (VRSPs);
  • group registered retirement savings plans (group RRSPs);
  • group tax-free savings accounts (group TFSAs);
  • deferred profit-sharing plans (DPSPs);
  • public-sector pension plans.

Supplemental pension plans go by many names: pension plan, registered pension plan, employer plan, etc.

An SPP is a plan to which an employer makes contributions so that employees who are members can draw a retirement income. Those employees can contribute if the plan allows it.

There are three types of supplemental pension plans:

  • Defined-benefit pension plan: the amount of the retirement pension is set in advance, based on a predetermined formula.
  • Defined-contribution pension plan: this plan provides for the employer's contribution and, if applicable, yours. Retirement income is not known in advance.
  • Target-benefit pension plan: the employer's contribution and the target benefit are set in advance. Retirement income is determined based on the plan's financial situation and adjustments of the target benefit.

If you are a member of a voluntary retirement savings plan, you can determine the amount of your contribution yourself. Your employer can also contribute, but is not required to do so. The amount of your retirement income depends, among other things, on the total sums accumulated in your accounts.

An employer can offer a group registered retirement savings plan This link will open in a new window. with conditions. Generally, group RRSP contributions are made through payroll deductions.

For more information on group RRSPs, contact the Canada Revenue Agency This link will open in a new window..

An employer can also offer you to invest in a group tax-free savings account This link will open in a new window.. The contributions that will be paid are not tax deductible. However, investment income and withdrawals, which can be carried out at any time, are not taxable.

For more information on group TFSAs, contact the Canada Revenue Agency This link will open in a new window..

A deferred profit-sharing plan This link will open in a new window. allows an employer to share a portion of the company's profits with his or her employees. The employer is the only one to contribute.

For more information on DPSPs, including payments, contact the Canada Revenue Agency This link will open in a new window..

There are many public-sector pension plans, the most common of which is the Government and Public Employees Retirement Plan (RREGOP). Public-sector pension plans are for employees in the Québec public and parapublic sectors (public service, education, health and social services sector). These plans are administered by Retraite Québec.

You are not a member of any workplace pension plan?

If you are not a member of a workplace pension plan, you must save more to protect yourself against the financial risks related to retirement, for example, the longevity risks and inflation risks. Knowing these risks and their effects on your income allows you to better plan for your retirement.

You can ask your employer to set up a supplememtal pension plan, a group RRSP, a group TFSA or a voluntary retirement savings plan (VRSP). Thanks to VRSPs, all workers can have access to a pension plan, including self-employed workers. In Québec, under the Voluntary Retirement Savings Plans Act, an employer is required to provide a voluntary retirement savings plan or another group savings plan that meets the criteria provided under the Act. This requirement applies to employers with 10 or more employees. VRSPs are also available to self-employed workers and to all persons who wish to participate.

You can also choose a VRSP registered with Retraite Québec and contact the administrator.

Employees, self-employed workers, business owners or savers can all benefit from the same advantages: an affordable plan and easy-to-understand investment options.

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