Advantages of a pension plan

To maintain the same standard of living after retirement

Whether a plan is a defined contribution plan, a defined benefit plan or a simplified pension plan (SIPP), it will nicely complement public plans. The main objective of supplemental pension plans is to provide retirement income over and above that paid by the public plans.

Concrete advantages for employees and employers

A supplemental pension plan is part of the fringe benefits that an employer can offer his employees. Besides the financial security it offers after retirement, it is a form of deferred pay appreciated by employees. For the employer, having a plan can make it easier to attract and keep competent employees.

For retirement and much more...

  • Contributions made to a pension plan are tax deductible.
  • Employer contributions do not result in any payroll taxes because they are not included in the calculation to determine contributions to other programs, such as employment insurance, the Fonds des services de santé, etc.
  • Investment income generated by the pension fund in which contributions accumulate are tax exempt.
  • The employer contributions are vested to the plan member as soon as his or her membership begins.
  • In the event of a member's death, his or her spouse receive a pension or other benefit. If there is no surviving spouse, a benefit can be paid to a designated beneficiary or to the member's heirs.
  • The benefits accumulated in a plan cannot be seized, except in a few cases, such as a seizure to alimony or child support or for the purpose of partition of family patrimony.
  • The pension fund does not belong to the employer; it cannot be seized if the business goes bankrupt.
Worth knowing about...

In addition to the preceding advantages, an SIPP has some of the advantages of a group RRSP and a defined profit sharing plan (DPSP). An SIPP is a plan type adapted to the needs of small businesses and their workers.

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