What is a Group RRSP or GRSP in Canada?

A Group Registered Retirement Savings Plan (Group RRSP) is an employer-sponsored retirement savings plan registered with the Canada Revenue Agency.

Employers provide group RRSPs for employers to save towards retirement with the option for an employer contribution.

Group RRSPs are like an umbrella RRSP where employees can open individual RRSPs to take advantage of better investment management fees.

How do Group RRSPs Work?

Group RRSPs are similar to individual Registered Retirement Savings Plans (RRSPs).

Your contributions to a group RRSP count towards your annual RRSP contribution room.

The CRA calculates your RRSP contribution room as 18 percent of your earned income in the previous year, the annual RRSP limit, your last year’s contributions to registered retirement plans, and other determinants. 

Through your Group RRSP, you can invest your contributions in allowable investment assets such as stocks, bonds, exchange-traded funds (ETFs), Guaranteed investment certificates (GICs), real estate investment trusts (REITs), and mutual funds.

Most employers offer a contribution match as an employer benefit, encourage you to contribute.

When an employer sets up a group RRSP with a plan administrator, they deduct your contributions directly from your paycheque to deposit into the plan. 

Through a group RRSP, you will have your individual RRSP account, and you can determine which assets your contribution funds are invested in based on your risk appetite and investment goals. 

You can contribute to a group RRSP until you turn 71 years of age.

You can receive your group RRSP contributions as a lump-sum payment and pay the applicable taxes when you retire.

Even better, you can convert your group RRSP to a Registered Retirement Income Fund (RRIF) and receive periodic payments in retirement while your balance still grows tax-free in the fund account.

You can also purchase an annuity using your group RRSP contributions when you retire.

Advantages of a Group RRSP

Before you become part of a Group Registered Retirement Savings Plan, here are some advantages that can make it beneficial for you.

• Your contributions to a group RRSP are tax-deductible.
• If your employer offers a contribution match, this is free money that provides income for you in retirement.
• Your money is a group RRSP grows tax-free, provided it remains in the account.
• Group RRSPs may be more cost-effective than individual RRSPs in fees and administrative costs.
• It is not compulsory for you or your employer to contribute to a group RRSP.
• You can access money in a group RRSP through the Home Buyers’ Plan (HBP) to buy your first home or the Lifelong Learning Plan (LLP) for education purposes.
• Automatic deductions directly from payroll allow you to save and invest conveniently.

Disadvantages of a Group RRSP

A group RRSP may also come with some disadvantages.

You should consider the following cons of using a group RRSP.

• Some employers require you to work for a certain period before you can contribute to a group RRSP.
• You have no choice in the Group RRSP provider; your employer determines which provider manages the RRSP.
• Most employers contribute to your group RRSP only if you contribute to it.

What Happens to a Group RRSP When You Quit?

You can convert your group RRSP to a Registered Retirement Income Fund (RRIF) when you leave an employer.

You will not pay taxes when you transfer your funds from a group RRSP to a RRIF.

Your money can still be invested in the RRIF, and you receive periodic income subject to tax in retirement. 

You can also transfer your group RRSP to another RRSP with the same financial institution where you have your group RRSP or a different RRSP issuer.

Your RRSP issuer will need to facilitate your transfer to avoid taxes.

Qualifying transfers between RRSPs are tax-deferred and do not impact your contribution room.

Of course, you may opt to receive your group RRSP contributions as a lump-sum payment, but the CRA will tax your withdrawals.

You can also choose to purchase an annuity with the funds in your group RRSP.

Transferring a Group RRSP to a Personal RRSP

You can transfer your group RRSP’s contributions and investment gains to a personal RRSP.

Generally, you will have this option when you quit your job or change employers.

Your employer may not allow you to convert your group RRSP to a personal RRSP, provided you still work for them.

You can transfer your group RRSP to a personal RRSP through your RRSP issuer without tax implications when you leave your employer.

You will need to contact your group RRSP provider to find out how to transfer your Registered Retirement Savings Plan.

Remember that group RRSPs may have lower administrative fees, a benefit you may lose when you transfer to a personal RRSP.

Frequently Asked Questions