Group Registered Pension Plan

RRP or Registered Pension Plan refers to a group plan arranged by the employers to give retirement income for their employees. This pension plan is fully registered with CRA or Canada Revenue Agency to offer tax advantages. The contribution that made in the Registered Pension Plan is tax-deductible with certain limits. Wherein, your investment income will not tax until paid out by the plan. 


Types of (RRP) Registered Pension Plan


Employers are required to pay or contribute to the registered pension plan, but the employees are not obliged to contribute. The registered pension plan has two types and these are as follows:

Defined Benefit – This is a type of registered pension plan that guarantees employees’ specific income in the time of their retirement. Defined benefit is being determined through formulas, that are commonly based on earnings and years of services. The employees may not be obliged to pay or contribute any amount of their income, just to defined a benefit plan. Employers are required and must contribute an additional amount to offer the promised benefit. Furthermore, many provinces have regulations in places that excludes employees in paying for over half of own benefits.

Defined Contribution – In behalf of the employees, the employers are the one who makes contributions, typically a part of the workers’ current earnings. However, there is a limit, eighteen percent of their annual income that is subject to dollar maximum.

That limit is being applied to the contributions made by the employers and the employees. Retirement incomes in the plan are based on the value of investment income and accumulated contributions when an employee retires. Defined contribution plan will depend on the selected investments and market performance of the employees when they are still working.

If you are included in the defined contribution plan, your retirement benefit is based on your own contribution and the contribution of your employer, plus the investment income in this contribution. By the time of your retirement, the money is commonly used in purchasing Life income funds or life annuity in the insurance company from a financial institution. Apart from that, all the contributions made by your employer will be invested together with your contribution, as an employee.

The employees will not be able to know the exact amount of the pension benefits unless they retire. That is because your ultimate pension benefits are based on many factors, which cannot be identified until the time of your retirement.


What are the Factors that Affect Your Pension Benefits at Retirement?

Group RRP’s are an employee benefit and one of the most influential factors in the pension benefits of an employee is the money contributed to his/her account. It is because your pension contribution will depend on every employee and every pension plan. The more amount of money contributed into your account, the more amount you will get by the time of your retirement. Another factor that affects the amount of the pension benefits at retirement is the invested contribution that you earn during your working life.

Your earnings in the invested contribution will not be similar in every plan member and every pension plan. There are some plans that are responsible for investing money in your account, however, most of the pension plans require every plan member to make their own investment decision. For Group RRP and other group benefits contact Puhl Employee Benefits Inc. for a consultation.