Pension Plans

There are basically two types of Registered Pension Plans:

• The "Defined Benefit" plan is an agreement to provide specific benefits at retirement, based on years of service and earnings.
• The "Money Purchase" or Defined Contribution plan operates much like an RRSP.  Employer and employee contributions are accumulated in the plan and are used to purchase a retirement income, the amount based on the accrued funds and on interest rates at the time of the employee's retirement.

The Money Purchase RPP is by far the simpler, more flexible plan.  The Defined Benefit plan, while providing the employee with a guaranteed amount of retirement income, can be complex and expensive.  The Money Purchase concept is therefore more popular today, particularly with small to medium size businesses.  An important advantage is that the employer can easily control and forecast the cost of the program, which is always a fixed percentage of payroll.  Total plan expenses are typically about 5% of the covered payroll, but can start lower if necessary. We have also designed rich plans.

The unique features and tax treatment of the plan make an MP-RPP one of the most highly appreciated benefits an employer can provide.  It is an effective way to attract and keep well-trained, motivated employees.  An RPP can also be used in conjunction with a Payroll Deduction RRSP or Deferred Profit Sharing Plan.