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A group retirement solution, or group retirement savings plan (GRSP) is an umbrella term for any retirement plan offered to employees by their employer. Employers will typically offer a GRSP as an employee retention incentive, and to defer a portion of their payroll expenses as tax-deductible. The goal of a GRSP is to help employees save for retirement, tuition, or another long term financial goal. An effective group retirement savings plan should help educate employees on retirement options and include financial tips, in addition to the primary purpose of helping employees save for the future.
Generally, a GRSP works by deducting and depositing a percentage of an employee’s paycheque (deemed by the employer) directly into a savings account, or preselected investment. Employers will typically match contributions. Employees may contribute up to 18% of the previous year’s income, plus or minus adjustments noted on an individual’s Canada Revenue Agency Notice of Assessment. This limit includes employer contributions, so the total contribution by both employers and employees may be no more than 18% combined.
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The group retirement solutions mentioned in this post also have quotes available instantly in the CloudAdvisors Marketplace. Log in and browse quotes to find out if a GRS is right for your business at no cost, and no obligation.
Why should you offer employees a GRSP?
Competitive Recruitment
In the current job climate, 2022 has been deemed a job-seekers market, with nearly 40% of companies reporting difficulty hiring and retaining adequate talent. With hiring competition on the rise, employers looking to hire motivated, experienced employees should look to their total compensation package to encourage job applicants.
When employers offer a group retirement solution as part of their total compensation package, they become much more attractive to both job seekers and current employees. Altogether, employee benefits, salaries, and retirement options are significant determinants of an employee’s willingness to remain with their current organization.
While offering employees a higher salary remains the number one method to retain employees, offering a retirement plan comes in at a close second. One study found that nearly 71% of Canadians would be willing to forgo a wage increase in favour of a retirement plan.
Rising cost of living
The desire to build good saving habits is largely due to the rising costs of living across Canada, with housing, food, and transportation costs increasing rapidly. As of June this year, nearly half of Canadians 55 and older have delayed retirement due to insufficient funds. Older Canadians who have retired also fear they will run out of money during retirement with the rapid rise in living costs.
For young Canadians, most are concerned they’ve underestimated how much is needed for retirement. Partly, this concern stems from a need to prioritize current expenses, rather than saving for retirement. Altogether, group retirement planning is a needed employment perk to quell financial planning anxiety, and help employees build health financial habits.
Considerations Before Adding a GRSP to your plan
Employee needs
Before diving in to a group retirement plan, consider the needs of your employees. As with any part of a compensation package, it’s important to consult your employees and assess workforce needs before diving into a new insurance offering. For group retirement options, it’s important to understand employee preferences if you’re operating under a tight budget. Employees may feel more strongly about another benefit, if there is a choice between one or the other. While statistics and trends may point to the popularity of a retirement plan, if you as an employer can’t offer everything, it’s best to determine the value of a retirement plan as it relates to your business. In addition to employee preference, employers should assess employee demographics. Depending on the average age and stage of life of your workforce, employees may be more interested in savings plans related to education, home ownership, or other milestones, as opposed to retirement.
Hurdles for small business
For small employers in Canada, there can be a number of hurdles in offering retirement benefits to employees. For small businesses, or organizations with a tight budget, offering a retirement plan can be a more affordable option than other compensation while maintaining employee satisfaction.
Among all businesses in Canada, only 8% offer any kind of GRSP option to employees (CloudAdvisors benchmarking data). In larger companies with more than 1000 employees, retirement options are more popular, offered by 18% of organizations. While small businesses tend to ignore group retirement solutions, GRSPs can be an excellent method to compete in the job market. In addition, not all group retirement solutions are built the same, with some aimed specifically at businesses under 50 employees.
Our top suggested Retirement Savings Plans
Justwealth
Justwealth offers both Digital Group Savings Plans and Registered Education Savings Plans (RESP) for businesses. In addition, they have instant quotes available in the CloudAdvisors’ Solution Marketplace, so you can determine if the pricing is right for you in less than three clicks.
The Justwealth Digital Group Savings Plan contains both group RRSP and group TFSA options for employees. Justwealth is an excellent option for small business owners looking for a flexible, affordable option. With no fee to employers, voluntary contributions, and contribution matching options, the Digital Group Savings Plan is designed to support small businesses. From the employee side, Justwealth focuses on transparent and low fees, with a digital-first approach. In addition, they emphasize financial education, offer investment support from a Registered Portfolio Manager, and include a number of automated actions including portfolio recommendations and investment monitoring.
Open Access
Another excellent option for small and medium sized businesses is Open Access’ Group Retirement & Pension Plans, Canada’s leading independent provider of retirement plans. You can generate an instant monthly quote from Open Access here.
Open Access is an alternative to traditional retirement plan from insurance providers, and offers complete customization with their retirement plans. Through a combination of personal investment management, personalized service, and financial education, Open Access is Canada’s first and only Capital Accumulation Plan fiduciary provider. This means they adhere to a fiduciary standard that calls for full disclosure, no proprietary offerings, no conflicts of interest, and complete transparency.
This week we're welcoming @OpenAccessLtd to the marketplace! 🙌
— CloudAdvisors (@cloudadvisorsCA) October 12, 2022
You can craft, design, or optimize your group retirement plan for your organization with Canada's leading independent group #retirement provider.
Find Open Access in the marketplace: https://t.co/Qu1lSMVKur pic.twitter.com/ofK8CO551B
IA Financial
If your organization is looking for a more traditional RRSP, another excellent option is the IA Financial Group Registered Retirement Savings Plan (RRSP). Get started by generating an instant quote from IA Financial for their group RRSP option.
This group RRSP offers employees the opportunity to make contributions through payroll deductions or through pre-authorized deductions from their bank account. This benefits employees financially in that it both facilitates their ability to save, and allows them to benefit from immediate income tax savings. IA Financial offers flexibility in their plan design, and uses simple administration tools to make investment management easy for employees. This is a low cost option that also allows for the employer to make contributions, while sheltering employee income from tax deductions.
Cascades Financial Solutions
Cascades Financial Solutions offers a unique product aimed to help employees strategically plan for retirement, and offers an instant quote in the CloudAdvisors Marketplace.
Through the use of Artificial Intelligence (AI), Cascades Financial Solutions identifies ways Canadians can save money by paying less taxes over time based on how they withdraw funds form their accounts. By entering employer information in a simple questionnaire, Cascades’ AI generates a simple report revealing the income tax savings of competing withdrawal strategies. This is an excellent option to employers looking to complement their existing group RRSP with financial advice, data management, and decumulation strategies.
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