Everything you need to know about GRSPs
A Group Retirement Savings Plan is a helpful tool to fund your future retirement
April 16, 2024
You've probably dreamed of your ideal retirement set up. Maybe you're spending it with grandkids. Maybe you're travelling. Maybe you're finally getting to do some reading. No matter the dream, a Group Retirement Savings Plan (GRSP) is a helpful tool to fund that dream and make it your reality.
Investing in a group registered retirement savings plan (Group RRSP) shouldn’t be complicated. You shouldn’t have to wade through a ton of financial jargon, or try to navigate a complicated sign-up process, or get overwhelmed by fund selection and contribution amounts. It should be simple to take advantage of your company’s financial wellness benefit. And armed with a little knowledge, it totally can be.
The purpose of this article is to help demystify the group registered retirement savings plan by walking you through the basics and answering a few key questions, such as what is a Group RRSP, what are the key advantages, and how can you make the most of this financial wellness benefit so you can retire faster.
What is a GRSP?
The RRSP is one of the most popular financial accounts used by Canadians to save for retirement. A group registered retirement savings plan (often referred to as a Group RRSP or GRSP) is similar to an individual RRSP in that they have the same tax advantages and follow the same rules. However, there are several key differences. Unlike an RRSP, a GRSP is an employer-sponsored plan that permits employer matching. It also provides automatic contributions directly from your pay cheque, and typically offers lower management fees due to the pooling of assets from everyone in the company. Think group discount.
7 key advantages of a GRSP
If your employer offers a GRSP, you should jump for joy and then immediately sign up because there are so many amazing benefits for you to take advantage of.
- Instant tax deductions. Contributions to a GRSP use pre-tax dollars, which means you get the deduction right away. This helps to reduce your taxable pay and, in turn, reduces the taxes coming off of each pay cheque. When using an individual RRSP, you have to wait until tax time to deduct your contributions.
- Free money. With a regular RRSP, all contributions come from you. With a GRSP there is the potential for free money if your employer offers RRSP matching. For instance, you might contribute 3% of your salary to your GRSP, and your employer might kick in another 3%. It’s free money!
- Easy, automatic contributions. Once set up, GRSP contributions are automatically deposited from your pay cheque. This means you don’t have the chance to spend your investment money — it's gone before you can see it or think about it. It also means you don’t have to continually think about or remember to invest; it just happens.
- Lower management fees. A GRSP typically offers lower management fees because assets are pooled, so many providers offer a discount. Or, in the case of Wealthsimple, low fees are part of every client offering — group or individual. That means you get to keep more of every contribution.
- More than just retirement. Unlike some other retirement savings plans that only allow you to use your money for retirement purposes, a GRSP is more flexible. You have the option to use the funds for either the Home Buyers Plan (HBP) or the Lifelong Learning Plan (LLP).
- Professionally managed. For those that don’t feel confident investing on their own, having a professional managed GRSP can make it easier to start the investment process and stick with it.
- No vesting period. GRSPs do not have a vesting period, so you own the money as soon as a contribution is made. You aren’t obligated to stay in a job for a certain period before the money is yours.