Canadian Money Forum banner

1 - 8 of 8 Posts

·
Registered
Joined
·
71 Posts
Discussion Starter #1
Hi,

I approached my company before opening an RRSP account with RBC. Company HR said that if I didn't open one with Standard Life, then the contributions would be after-tax money! It came as a shock.

Up until now, I thought only before-tax money has to be contributed into RRSP so that at an old age, when income would be supposedly lower, I could benefit from a low-tax bracket. Isn't that the whole point?

They are saying basically, "It's either Standard Life and before-tax money, or after-tax money into any other RRSP account."

I am confused. For God's sake, after tax money is for a TFSA, not RRSP!
 

·
Registered
Joined
·
10,101 Posts
Employers often have group plans set up with a company (often insurers) that administers the plan, and payroll deductions go straight into the plan. That is not unusual. Go with it.
 

·
Registered
Joined
·
1,005 Posts
I think what your HR rep is meaning is this.
They have arranged a group RSP with Standard life. They will make contribution on a pretax basis ( ie adjust your normal witholding tax to reflect the contribution).
This means at the end of the year, your T4 will show lower tax deducted that takes into account your rsp contribution so all things being equal, you will not get an income tax refund.

If you want to make your contribution through RBC, your employer has no arrangement with them, so HR would cut you a cheque but withhold your usual tax. You would then deposit money to the rsp at RBC. At the end of the year your T4 would reflect the higher tax withheld, but you would get a refund due to the rsp contribution.
In the end you would end up paying the same income tax - you would just have to wait.
As AR said just go with it. It is simple and seamless. You can also usually transfer out of these group plans once a year so if there is a reason you have or want to have your rsp at RBC, you can go to RBC once a year and transfer most of your standard life balance over. ( leave a few $ to keep the group plan active)

Note that a group plan usually deducts your contribution each pay cheque. To have them cut you a cheque every payday so you can deal else where will not endear them to you:-o.
 

·
Registered
Joined
·
15,839 Posts
As AR said just go with it [employer RRSP plan w Standard life]. It is simple and seamless.

You can also usually transfer out of these group plans once a year so if there is a reason you have or want to have your rsp at RBC, you can go to RBC once a year and transfer most of your standard life balance over. ( leave a few $ to keep the group plan active)

there you go. You can have your cake - employer Standard life RSP plan - & eat it too, one year later at RBC.




To have them cut you a cheque every payday so you can deal else where will not endear them to you
might the above be a little bit backwards though. To have the employer cut a special cheque every payday will not endear the employee (you) to the employer's HR (them).

.
 

·
Registered
Joined
·
10,101 Posts
The employer does not care. They are actually doing the majority of employees a 'favour' by making the payments directly into group RRSPs (and reducing source income taxes withheld) without the employee having to worry about proactively making RRSP contributions and deductions on their own. It is like a forced savings plan since the bulk of employees have very little motivation to make full RRSP contributions and worse yet, invest poorly into high cost mutual funds, low interest GICs and/or HISAs. At least this option and Standard Life will 'force' employees to make conscious choices on an RRSP investment portfolio with MERs that are lower than that of the retail public.

It is pretty much only 'smart' CMF type investors who can likely do better on their own than the group RRSP Standard Life plan, and they can make transfers on a periodic basis from SL to their own RRSPs (whether that be once a year or less frequently). If the employer is also making contributions, the 'hold' period for the employer's contribution may be longer than for the employee's contribution.
 

·
Registered
Joined
·
37 Posts
You might also be able to keep the RRSP at RBC and reduce the tax from source by filling out the CRA T1213 form. I believe you’d have to arrange monthly automatic RRSP transfers with RBC and include documentation from RBC with the T1213 and give to your HR department. I think you have to fill this out annually. I did this for a couple of years, about 25 years ago, so things may have changed.

It’s much easier to go with the Standard Life Group RRSP.
 

·
Registered
Joined
·
1,005 Posts
Quote Originally Posted by twa2w View Post
To have them cut you a cheque every payday so you can deal else where will not endear them to you'
Quote by Humble Pie
might the above be a little bit backwards though. To have the employer cut a special cheque every payday will not endear the employee (you) to the employer's HR (them).

Thanks HP. That is what I meant. The 'to you' should have been 'toward you'

I would think the OP would have to be a special snowflake in the company for HR or payroll to do this for him. Or a very small company that really wants to keep emplyees happy.

I have seen a few employers who have cut a cheque once a year directly to the employees RSP provider in these situations but pretty rare.
 
1 - 8 of 8 Posts
Top