Group Investments

Registered Pension Plan - RPP

A form of a trust that provides pension benefits for an employee of a company upon retirement. RPPs are registered with the Canada Revenue Agency. The employee and employer, or just the employer make contributions to this retirement plan until the employee leaves the company or retires.

Notes: Contributions to an RPP are tax deductible for both the employee and the employer. Contributions to the plan and gains on underlying assets are tax deferred, so the funds are taxed when they are withdrawn from the plan.

Registered Retirement Savings Plan - RRSP

A legal trust used to save for retirement. RRSPs are registered by the Canada Revenue Agency. Contributions to an RRSP are tax deductible, which makes contributions to RRSPs tax deferred until they are withdrawn. An RRSP can contain stocks, bonds, mutual funds, GICs, as well as other investments. Because of their tax advantages, RRSPs are an important retirement savings instrument for Canadians. There are two main tax advantages of an RRSP:
1) Contributors deduct contributions against their income. For example, if a contributor's tax rate is 40%, for every $100 he or she invests under an RRSP will save that person $40 in taxes, up to his or her contribution limit.
2) Investments under an RRSP grow at tax sheltered. Returns on investments are exempt from any capital-gains tax, dividend tax or income tax. This means that investments under RRSPs compound at a pretax rate whereas normal investments' realized returns are taxed at least annually.
Notes:
RRSP contributors are delaying payment of taxes to a time when their marginal tax rate will be lower (during retirement) than it is during their working years. The Government of Canada has provided this tax deferral to Canadians to encourage retirement savings, which, in turn, will help the population to rely less on the Canadian Pension Plan to fund retirement.

Deferred Profit Sharing Plan - DPSP

An employer-sponsored Canadian profit sharing plan that is registered with the Canadian Revenue Agency. On a periodic basis, the employer shares the profits made from the business with all employees or a designated group of employees. Employees receiving a share of the profits paid out by the employer do not have to pay federal taxes on the money received from the DPSP until it is withdrawn.

Notes:
An employer that chooses to participate in a DPSP with some or all of its employees is referred to as the sponsor of the plan. Employees who are granted a share of the profits are the trustees of the plan. DPSPs are a type of pension.

Non Registered Invesments

Non-registered savings plans play the same role as personal savings accounts. You can accumulate savings to carry out your plans (education, trips, a house, etc.) or increase your retirement income. Who Should Consider a Non-Registered Savings Plan?
* Investors who have reached their registered retirement savings plan (RRSP) contribution limits and would like to capitalize on their investments to carry out their plans, while retaining a certain amount of control over their investments.
* Persons wishing to obtain a source of income through a systematic withdrawal program.
* Investors wishing to accumulate amounts in the short term (financial cushion, vacation, etc.).

Retirement Compensation Agreement

A retirement compensation arrangement (RCA) is a plan or an arrangement under which an employer, former employer, or in some cases an employee makes contributions to a custodian. The custodian holds the funds in trust with the intent of eventually distributing them to the employee (beneficiary). Distribution may occur on, after, or in view of:
* an employee's retirement;
* an employee's loss of an office or employment; or
* any substantial change in the services the employee provides (e.g., an athlete retained as a scout after the end of a professional playing career). An employer or former employer may acquire an interest in a life insurance policy (including an annuity) to fund benefits on, after, or in view of an employee's retirement, an employee's loss of an office or employment, or any substantial change in the services the employee provides. In this case, we consider this interest to be the property of an RCA and the employer to be the custodian of the RCA.