Defined Contribution Plans

Defined contribution plans are essentially plans with predetermined contributions established as a percentage of the salary or as a fixed amount. The accumulated contributions and investment income determine the amount of the retirement pension.

Registered Pension Plans (RPPs)

A registered pension plan (RPP) is the so-called “traditional” savings plan. The employer and, most of the time, the employee make predetermined contributions that are capitalized in a tax shelter. The money accumulated in a RPP cannot be withdrawn before retirement (except for voluntary contributions) since it will be used to provide retirement income.

Simplified Pension Plans (SPPs)

As its name indicates, a simplified pension plan (SPP) is a simplified version of the traditional RPP. We assume most of the administrative responsibilities involved in the plan, making plan administration simple and less costly for the company. The employer and, most of the time, the employee contribute. In general, the funds cannot be withdrawn before retirement.

Group Registered Retirement Savings Plans (Group RRSPs)

Group registered retirement savings plans (RRSPs) are the most popular way to save. They enable members to build up capital that can be used to generate tax-sheltered retirement income. The member and, in certain cases, the employer make tax-deductible contributions. There is no minimum contribution, and the amounts invested are not locked in. They may therefore be withdrawn at any time. Since contributions are deducted at source from the participant’s salary, saving is easier.

Locked-in Retirement Accounts (LIRAs)

A locked-in retirement account (LIRA) is a product that is specially designed to receive the amounts acquired under a pension plan (or retirement plan), for example upon termination of employment. It allows you to accumulate income in a tax shelter. It is not possible to make withdrawals from an LIRA before retirement.

Deferred Profit Sharing Plans (DPSPs)

A deferred profit sharing plan (DPSP) is a plan under which an employer distributes a portion of the company’s profits to some or all of the employees. Only the employer contributes to a DPSP. This type of plan is very flexible for the employer, since it does not involve a permanent financial commitment. Contributions are not locked in and are vested in the employee after two years of membership (or less, as set out in the plan).