Pension plans Retirement

How Group RRSPs and Group TFSAs work

2 min read

Registered Retirement Savings Plans (RRSPs) help Canadians save towards retirement and offer certain tax benefits. Tax-free Savings Accounts (TFSAs) are a savings vehicle that Canadians can use towards retirement or major purchases. There are individual RRSPs and TFSAs as well as group plans. The main difference is that group plans are set up by your employer.

If you have a Group TFSA or a Group RRSP, there are some important things to know about your plan.

On this page you’ll find

Five things to know about Group TFSAs

  1. All TFSA investment earnings are tax-sheltered, but contributions are not tax-deductible.
  2. All TFSAs have annual contribution limits that are the same for all Canadians. If you don’t contribute the full amount each year, you can carry forward the unused amounts.
  3. You decide how your money is invested from the investment options your employer makes available.
  4. You can take money out when you want, for any reason, without paying any tax.
  5. If you take money out, you can re-contribute it the following year, in addition to the annual maximum.

CAUTION

While you’ll have a variety of investment options to choose from, you’ll likely have less choice than you would with an individual TFSA.

Four things to know about Group RRSPs

  1. A Group RRSP is designed to encourage you to save at work by contributing through payroll deductions.
  2. It’s possible that both you and your employer may contribute, depending on the rules of the plan.
  3. All RRSP contributions (both yours and your employers) are tax-deductible to you — and all investment earnings are tax-sheltered.
  4. Like an individual RRSP, you decide how your money is invested. Your employer will provide a range of investment options to choose from. You’ll likely have fewer investment choices than you would with an individual RRSP.

CAUTION

There may be restrictions on withdrawals from your Group RRSP while you are employed. Understand the rules of the plan before you invest.

What happens to your Group RRSP If you leave your employer

The money in your Group RRSP stays with you, not your employer. If you leave your employer, your money can be:

  • transferred to your own individual RRSP (or RRIF if you want to be receiving immediate income and if you are eligible to transfer to a RRIF),
  • used to buy an annuity, or
  • taken in cash (it will be taxed as income in the year you receive it).

Summary

  • Group RRSPs and TFSAs work the same way as individual plans. The main difference is you contribute to your plan through payroll deductions.
  • There may be matched contributions, depending on the plan.
  • You and your employer can contribute to the Group RRSP depending on the plan.
  • Your money is not locked in if you leave your employer.
  • Understand the contribution and withdrawal rules for your Group TFSA and Group RRSP.
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