Group RRSPs cut  taxes instantly at source and provides a valuable, low maintenance  benefit for employees.

Group RRSP Basics

In a group RRSP, an employer arranges for employees to make contributions, as they wish, through a schedule of regular payroll deductions. The employee can decide the size of contribution per year and the employer will deduct an amount accordingly and submit it to the investment manager selected to administer the group account. The contribution is then deposited into the employee's individual account and invested as specified.

Instant Tax Savings

The big difference with a group plan is that the contributor realizes the tax savings immediately, instead of having to wait until the end of the tax year. With an individual RRSP contribution, the tax break comes as a refund after taxes are filed the following year. This means of course, the government gets to enjoy an interest free loan of the contributor's money. On the other hand, Group RRSP contributions are made on a pre-tax basis, so the amount of tax withheld by the employer is calculated after the group RRSP contribution is deducted from taxable income. Result - an instant tax saving to the employee. With a group RRSP, you will not overpay your taxes during the year and then have to wait until your income tax return is processed to receive a refund.

A Group RRSP cuts taxes instantly at source and provides the difference as extra take-home pay to be spent or saved as the employee pleases.

There are many advantages to a group RRSP including:

Low cost: Some Group RRSPs require only a minimum contribution per month. The more you save and the longer you can do so, the bigger your retirement income will be.

Defer taxes: All RRSP contributions reduce the income tax you pay. Investment earnings grow tax-free until you withdraw them.

Immediate tax relief: A $25 contribution only costs you $15 off your net pay (assuming a 40% tax bracket) because you get your tax break when each contribution is made.

Payroll deduction: Your contribution is deducted from your paycheque before you have a chance to spend it somewhere else. This can be a painless way to save.

Access to competitive investment options: Group RRSPs offer you investments from a variety of top managers.

Contribute on behalf of your spouse (if offered in your plan): If the income levels between you and your spouse differ significantly, the higher earner should make the RRSP contributions to get the biggest tax break. At retirement, the lower earner makes withdrawals from the Spousal RRSP at a lower tax rate.

Regular updates: Through your member statements, newsletters, and reference materials, you receive regular updates to help you plan for your retirement.

Courtesy of professionalreferrals.ca