The Association for Canadian Pension Management (ACPM) has rolled out a new online course on retirement that will help you up your game when it comes to mastering the topics of retirement saving, and turning those savings into income.

The course consists of six sections, with questions at the end to test your new knowledge. The first section, The Importance of Saving, talks about the importance of making savings part of your financial plan. “Many imagine retirement savings can wait for later,” the course explains, adding that it is far harder to play catch up than to start saving, even a little bit, while you are younger.

Small savings, we learn, can add up due to the “compounding effect” of time — even $50 a month in retirement savings can grow to more than $16,000 in 20 years.

The second section, Individual Registered Savings Plans, looks at registered retirement savings plans (RRSPs), Tax-Free Savings Accounts (TFSAs), the Home Buyers Program and Lifelong Learning Program (these allow you to “borrow” from an RRSP to pay for buying a home or furthering your education) and the new Tax-Free First Home Savings Account.

Ideas expounded on here include how much you should be expecting to live on when you retire — a rule of thumb given here is 70 per cent of your gross, pre-retirement employment income. The course notes that money from an RRSP should be considered to be “deferred income,” since you are able to put it away and grow it tax-free until the time you take it out as future income, when it is taxed.

The Government Retirement Income section walks you through the Canada Pension Plan (CPP), Old Age Security (OAS) and the Guaranteed Income Supplement. The important points raise about CPP is that the benefit it provides it quite modest, with the average monthly after-tax payment ranging in the $700 range. And while OAS is a universal benefit, it can be subject to a partial or even full “clawback” if you earn more than a certain level of overall retirement income.

The Workplace Retirement Savings section walks you through the difference between defined benefit, target, and capital accumulation plans. Defined benefit plans provide you a lifetime benefit based on a formula that takes into account your earnings and years of membership in the plan; benefits are guaranteed. Target is similar, but lacks the guarantee. With a capital accumulation plan, what’s “defined” is usually how much money you and your employer contribute — your income will be based on how well those savings are invested. Examples of capital accumulation plans are defined contribution plans, group RRSPs, and of course the Saskatchewan Pension Plan.

The final sections talk about the critical “transition to retirement” stage, where you really need to know exactly what your retirement income will be and what expenses you will need to cover, as well as “decumulation,” which involves turning the money you have saved in a capital accumulation plan into income, either by withdrawing money periodically or converting some or all of it to an annuity, which provides a guaranteed monthly payout.

Estate planning — a complex topic that we all need to know more about — is also covered off.

ACPM has done a great job here. The ACPM Strategic Initiatives Committee (SIC), of which SPP’s Executive Director Shannan Corey is a proud member, led this project, and a broader financial literacy framework for plan sponsors is in the works. The group feel a national effort towards broader financial literacy is an important project, she notes.

Shannan says that response to the program has been good so far since the course was rolled out late last year, with close to 200 people graduating from the program.

Asked if the course might make its way into school curriculum one day, Shannan says “yes, we have talked about that and a contact of mine who teaches financial literacy for high school seniors is using the course as part of this curriculum.” It would be great, she adds, to see usership of the course expand.

“We feel it is a really great tool, but that it will take time for it to gain credibility and exposure. The financial literacy framework is going to be pretty amazing and should help get broader national exposure too — that one may have broader uptake as it is designed for plan sponsors rather than individuals,” she adds.

ACPM describes itself as “the leading advocacy organization for a balanced, effective and sustainable retirement income system in Canada,” and ACPM member organizations “manage retirement plans for millions of plan members. “

The group believes that “part of having a better retirement system is to provide education to those preparing for and contemplating retirement.”

According to ACPM, the motto for retirement savings is “the sooner the better.”

They state that their online retirement savings course is designed to be of value to all ages. “If you are in your twenties or thirties and just starting your career path, this course is for you.  If you’ve reached the point where you are building your household savings but not yet focused on retirement savings, this course is still for you. And if you’re nearing retirement but haven’t already learned how to manage and accumulate retirement savings, there are still many important lessons to be gleaned here,” states ACPM.

Finally, ACPM notes that many Canadians are not well prepared for the inevitable retirement from work that lies ahead of them.

“Nearly one in five retirees has less than $25,000 in savings and investments while more than half of Canadians do not have a financial plan for their retirement,” the group states. “It is our hope that this course will help you gain an understanding of pensions and retirement savings as you plan for your retirement.”

Many Canadians don’t have any sort of retirement program at the workplace. If you’re in this group, the responsibility for saving for your future retirement is squarely on your shoulders. Fortunately, the Saskatchewan Pension Plan offers a program for any Canadian with unused RRSP room. SPP, which operates on a not-for-profit basis, will invest your savings in a pooled retirement fund managed at a very low group rate. When it’s time to retire, your income options include choosing one of SPP’s lifetime annuity options, which will ensure you never run out of money. Check out SPP today!

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A new study has found that every $10 of public sector pension that is paid out to a retired member returns $16.72 of activity in the Canadian economy.

The study was produced by the Canadian Centre for Economic Analysis on behalf of the Canadian Public Pension Leadership Council.

Save with SPP spoke with Derek Dobson, CEO and Plan Manager of the Colleges of Applied Arts & Technology Pension Plan (CAAT) and a Co-chair of the Council, to further explore the survey’s results, and to talk generally about the value of pension programs.

He notes that the study is “agnostic” about what type of pension plan is producing the $10 spent by its retired members.

“Any plan that uses experienced investment professionals, and pooling – I include the Saskatchewan Pension Plan as an example of that – is delivering pensions efficiently,” he explains. So whether the $10 is produced by an efficient defined benefit (DB) plan or an efficient defined contribution (DC) plan, the economic benefits are the same.

The study noted that – looking at public sector pension plans only — $82 billion of economic activity was generated in 2019, “supporting 877,100 jobs and $33 billion in wages for Canadians,” according to the study’s executive summary. Governments gain $21 billion in tax revenue, the study notes. Collectively, Canadian public sector DB plans have an eye-popping $1.27 trillion in assets.

While the study found pension spending generally benefited all Canadians, one interesting aspect was that rural businesses seemed to derive more positive gain from local public sector pensioners.

Dobson says part of the reason for this may be the current trend towards a migration from expensive city living to more affordable smaller centres. “The housing is more affordable in smaller cities and towns,” he says. “We also found that those living in smaller towns tend to spend more locally than those in cities – so that is part of the reason the economic benefits of pensioners had a 6.5 per cent bump” in rural areas when compared to urban centres.

Given the “win win” nature of having a good pension plan – the retired member gets the steady, predictable income, while the economy benefits from it being spent – we asked Derek Dobson if there should be wider availability of good pension plans for those who lack them.

CAAT’s own DBplus pension plan, a program that offers a strong, secure lifetime pension program, has grown in just two years to include 200 participating employers. “We are trying to remove barriers to access to good pensions,” Dobson explains.

A good pension, he explains, has the added benefit of helping employers attract and retain good employees. It delivers twice the retirement benefits per dollar saved than investing independently in Group RRSPs, and helps employees reach their retirement goals faster with employer-matched contributions. Dobson says it is a shame to see well-trained healthcare workers and engineers leave the country for jobs elsewhere – a good pension program can keep them here in Canada.

Another advantage for employers is that if a pension plan is offered by a third party rather than being administered and funded by the employer, it’s a time, risk and funding relief for the employer. “No Chief Financial Officer in the private sector wants to see pension liabilities on their balance sheet,” he explains. With DBplus, the employer’s pension cost is a fixed amount.

“Many studies have shown that year after year, more and more Canadian workers are willing to forego more pay in order to get a better pension,” he says.

The only three organizations he currently sees as trying to bring pension coverage to underserved sectors are CAAT, through its DBplus program, the OPSEU Pension Trust, through its similar OPTrust Select plan, and the Saskatchewan Pension Plan through its voluntary, open defined contribution program.

Dobson concludes by saying that Canada has become known around the world for the efficiency of its pension system, the “Maple Model” of pension plan that feature pooling, low administration costs, expert investing, and joint governance where members and employers have an equal say in how the systems are run.

“Public service pension plans are an amazing and unique asset for Canada. So the more people that can be brought in, the better – pensions really help workers, retirees, their families and the economy.”

We thank Derek Dobson for taking the time to speak with us.

Did you know that the Saskatchewan Pension Plan has, according to its 2020 Annual Report, has more than $528 million in assets and 32,613 members? This growing open defined contribution plan is designed specifically for those without a workplace pension – a made-in-Saskatchewan solution to the problem of retirement saving for individuals and businesses. Check them out today.

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When you are interviewing for a new a new job, perks like company-paid gym memberships, tuition reimbursement or a free cellphone may seem really attractive and influence you to accept the position. However, it is important to keep in mind that come tax time, all or part of the value of these employee benefits may be included in taxable income on your T4 slip.

Here are 10 things that may form part of your compensation and how they are viewed by CRA.

1. Group benefits: Amounts your employer pays for your life, accident and critical illness insurance coverage are taxable benefits. But when the company pays all or part of the cost of your extended health care, dental plan, short-term disability (STD) or long-term disability (LTD) insurance you do generally not pay tax on the premiums. If you collect on your STD or LTD insurance you will pay taxes if any part of the premiums were employer-paid.
2. Pensions/Group RRSPs: Your company’s contributions to your pension plan are not taxable. However, your employer’s contributions to your Group RRSP account are viewed as additional taxable income by CRA. But you can deduct RRSP contributions (up to $26,010 for 2017) so you will not actually have to pay taxes on Group RRSP contributions made by your employer on your behalf.
3. Service and recognition awards: Cash, gift certificates and things like gifts of stock certificates and gold coins are always taxable benefits. However, you can receive tangible tax-free gifts or awards worth up to $500 annually in some specified circumstances, such as a wedding or outstanding service award. In addition, once every five years you can receive a tax-free, non-cash long-service or anniversary award worth $500 or less
4. Clubs and Recreational Facilities – If your employer pays or subsidizes the cost of membership or attendance at a recreational facility such as a gym, pool, golf course, etc. it is considered a taxable benefit. But if the company provides a free or subsidized onsite facility available to all employees, it is not a taxable benefit.
5. Tuition reimbursement: If you get a scholarship or bursary from your employer it will be a taxable benefit unless you took the program to maintain or upgrade your employment skills. For example, if you need an executive MBA to be promoted, no tax is payable on the value of company-paid tuition. Where the company gives your child a scholarship or bursary, generally neither you nor your son or daughter who gets the scholarship has to pay taxes on the amount.
6. Transit Passes: Transit passes are a taxable benefit unless the employee works in a transit-related business (such as a bus, train, or ferry service business).
7. Child Care Expenses are a taxable benefit unless child care is provided to all employees in the business at little or no cost.
8. Mobile phone or internet: Charges paid by the company for the business use of your cellphone and internet are not taxable. If your phone or internet is used in part for personal reasons, that portion of the bill should be reported on your T4 as a taxable benefit. However, if the cost of the basic plan has a reasonable fixed cost and your use does not result in charges over the cost of basic service, CRA will not consider any part of the use taxable.
9. Subsidized meals: If the company cafeteria sells subsidized meals to employees, this will not be considered a taxable benefit as long as employees pay a reasonable amount that covers the cost of food preparation and service.
10. Discounts on merchandise: Generally, if your employer sells merchandise to you at a discount, the benefit you get is not considered taxable. A document posted on the CRA website in late 2017 suggested that CRA’s interpretation changed, but National Revenue Minister Diane Lebouthillier subsequently announced there have been no changes to the laws governing taxable benefits to retail employees.

This chart illustrates whether taxable allowances and benefits are subject to CPP and EI withholdings. The employer’s Guide: Taxable Benefits and Allowances, including What’s New? Can be found here.

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Written by Sheryl Smolkin
	Sheryl Smolkin LLB., LLM is a retired pension lawyer and President of Sheryl Smolkin & Associates Ltd. For over a decade, she has enjoyed a successful encore career as a freelance writer specializing in retirement, employee benefits and workplace issues. Sheryl and her husband Joel are empty-nesters, residing in Toronto with their cockapoo Rufus.

By Sheryl Smolkin

A press release I read recently titled “What will you do with your 2,000 hours a year when you retire?” made me stop and think about how my husband and I have spent our time since I left my corporate job 11 years ago and he fully retired in mid-2015. 

An RBC survey of 1,500 working Canadians age 50 and older found almost three-quarters (73%) are unsure what they’ll do with that extra time. While the study found nearly two-thirds (64%) have done some planning for how they will finance retirement, less than half have planned for retirement lifestyle decisions, such as where they will live, where they will travel (44% each) and what activities they will do (46%). 

I was 54 when I retired from a benefits consulting firm with a reduced pension and post-retirement medical benefits. I never intended to stop working and had a job lined up as editor of an employee benefits magazine working from home. That eventually morphed into a freelance writing business. 

My husband had no pension other than government benefits when he retired from his position as a software engineer with a major telecommunications company at age 65. However, over the years he made maximum allowable contributions to individual and Group RRSPs. After a couple of months’ break he contacted his former employer about contract work, but no opportunities have materialized.

We moved to a new “infill” house in Toronto near the subway in 2001 and since then, the value of our two-story plus basement home has doubled in value. We’d love to renovate a large bungalow and stay in the area, but the prices of even much smaller homes have increased so much that we would end up with significantly less house for the same amount of money. 

Based on a previous mobility issue, I‘d like to be living on one floor sooner rather than later, but for now we are staying put. We go to the gym regularly and climbing stairs helps us stay fit. When we were both working we paid for regular housecleaning, snow removal and grass-cutting. We now employ outside help less frequently but we are prepared to ramp it up again if one or both of us has health problems. 

Vacations are a high priority for us and our favourite mode of travel is cruising. We want to see and do as much as we can as long as we are healthy and able to purchase comprehensive travel health insurance. At least once a year, we try to bring our daughter’s family living in Ottawa on holidays with us so we can spend more quality time with them. 

Paying for expensive travel is one explanation for why I continue taking on freelance writing jobs. But the other reason is that I thrive on deadlines and I really love to get paid for something I enjoy doing. My hobbies include reading, working out and singing in a community choir but interviewing and writing provides me with both structure and a creative outlet. I work about 30 hours a week so I have loads of flexibility to fit in personal appointments, travel and family time. 

In contrast, my husband has found a whole new creative outlet since he retired. He finished off a coffee table that he has been working on for years and there is a matching end table on the drawing board. He has also designed and a produced a series of beautiful cheese boards, bread boards and cutting boards (see above) that friends and family have received as welcome gifts. While in future he may consider selling a few of his pieces there is no pressure for him to do so. 

I can’t say we exactly planned in advance how we would fill up our days when we left the world of work, but once our finances were in order, we had the latitude to make it up as we went along. We know that retirement in our 50s and 60s (the go-go phase) is likely to be different than in our 70s and 80s (the slow-go phase) or even 90s (the no-go phase) but I think we’re on the right track. I’ll know when it is time to send out the last invoice and together we will decide when it is the right time to sell our house and downsize. 

Have you thought about how you will spend your time once you leave the office for the last time? Tell us how you are spending your 2,000 hours by sending an email to so*********@sa*********.com.  We’d love share your story.

By Sheryl Smolkin

Today I’m interviewing actuary Karen Hall for savewithspp.com. Prior to her recent retirement, she was a vice president at the consulting firm Aon Hewitt, based in Vancouver. In addition to enjoying her retirement, she is continuing to explore cost effective and easy ways to create a steady income out of defined contribution (DC) pension savings.

Karen has 35 years of professional experience in the areas of pension actuarial consulting, flexible benefits consulting, senior management and HR leadership. She is also the author of the book, Risk Management Strategies for an Aging Workforce available on Amazon. Thanks so much for joining me today, Karen.

 

Q: Most Canadians in the private sector today have defined contribution pension plans. Tell me how a DC plan works.
A: Well, Sheryl, defined contribution means the contributions going in are defined or fixed. The member and her employer each contribute to the plan. The member often chooses how the money is invested from a number of investment options provided by the plan. Then, when the member comes to retire, she has a lump sum amount saved.

Q: On retirement, the conversion of DC assets into retirement income is for the most part left up to retirees. Why is that a problem?
A: If you buy an annuity you don’t get much in income for the amount you saved. The only other alternative is doing it yourself, that is, choosing investments, deciding how much to withdraw and figuring out how to make the money last for your lifetime. If you rely on advisers for any of this, you’re typically paying a substantial fee of at least 2% of your assets every year. The average person is just not equipped to make these decisions. I find it complicated enough and I’ve been living and breathing pensions for 35 years.

Q: Frequently, insurance companies or other DC or Group RRSP carriers, have group registered retirement income funds that retiring members of client group retirement plans can move their money into at retirement. Do these plans resolve some of these issues of high retail fees and poor financial literacy that you identified in our last question?
A: I don’t think they do. It would depend, of course, on the deal. But, often the fees are still quite high, near 2%, and the individual is still making all of the decisions I just mentioned.

Q: So how common are Group RRIF’s established for retirees of just one employer and what are the pros and cons of these types of arrangements?
A: Based on my experience, they aren’t that common. I can see why plan sponsor companies don’t want the ongoing administration. But I do think it would be great if the retiree could basically just stay in the plan and get the same investment options and fee deals as when they were active.

What I do see more often is where the insurance company that is the record keeper for the plan will have options for the member to transfer into their individual RRIF products, perhaps with a modest reduction in fees as compared to a retail purchase.

Q: How much clout do individual DC plan sponsors have in negotiating fees for their former members in rollover plans or single organization Group RRIF’s?
A: Well, as with everything, it depends on the size of the employer and on how much the employer wants to push for such a service. I do know of large employers who have negotiated such services.

Q: How should investment options be structured in rollover plans and single company Group RRIFs to maximize value from a DC plan in the decumulation phase?
A: In my view, the same options as when the member was active should generally be fine. The plan could add a target date type option for accounts and payments. But I think the typical choice of a range of balance funds and funds with conservative to moderate risk. You are going to live a fair number of years in retirement, so your time horizon isn’t that short.

Q: Saskatchewan and several other provinces, plus federal pension legislation, now allow payment of a variable pension from a DC plan – that means a stream of income that tries to simulate a defined benefit pension. Could you briefly explain to me how it works?
A: Well, it does depend on the plan and the legislation how they set it up, but very generally such an arrangement would allow the plan to provide payments to retirees. Like you said, it would simulate a defined benefit type of pension. There would generally be monthly payments and the amount of each payment would vary depending on plan experience.

For example, one client I know determines the amount of the monthly payment once a year. The amount is leveled for the year, so it’s paid every month at a level amount, but then it gets recalculated every January and depends on how well the fund did in the previous year. Generally – hopefully – it usually goes up or slightly or stays about the same. However, if it was a really bad year like 2008, the monthly pensions would likely be reduced.

Q: And how do they draw down funds in terms of various funds or investments the members are invested in or cash or whatever is actually sitting in the member’s account?
A: Well, in this particular one, when you retire and choose a variable pension, you have a lump sum amount and that lump sum amount gets translated into a number of units in the fund. Then, the fund pays a pension based on a dollar amount per unit, so the dollar amount per unit times the number of units you have, that’s what you get.

And what’s happening in this one is they’re insuring the mortality, so you don’t actually see your lump sum getting drawn down, you’re guaranteed to get that amount however long you live, and then the mortality is spread amongst the group.

Q: Oh, that’s really interesting. So it’s not just a matter of investments being sold and your money being distributed once a year, like if you had your own individual RRIF.
A: Right. So the plans can offer an individual RRIF and in those circumstances you’d see your money getting drawn down. But these variable pension ideas are to do with pooling the mortality risk.

Q: So to what extent have employers taken advantage of their ability to pay variable pensions to enhance the value of their DC plans to plan members in this all important decumulation phase?
A: As far as I know, not many have done so. Well, I know the one I gave in my example, but I don’t know of any other examples.

Q: And why do you think that’s the case?
A: Well, I think that it’s just new, right? CAP Guideline Number 8 says that plan sponsors should help members transition, but it’s new and sponsors are still considering their options. They are watching to see what others will do.

Q: Is there a real cost or a potential liability to employers that take on this responsibility?
A: That’s the big issue. For example, if you don’t have a big enough group, it’s hard to pool the mortality risk. The other thing is I’m not sure members are clamoring for variable pensions. Plan sponsors will pay attention when it affects active members and their appreciation of the benefit. I know there are plans that are interested in designing this and we’ll probably see how it develops in the next few years .

Q: Do you think it will be more of interest to public sector or private sector?
A: I think the public sector will have more ability to implement these and I think that union groups without a defined benefit plan might be interested.

Q: How important is effective employer communications in adding value to DC benefits for retirees in the decumulation phase?
A: Some employers are doing more to help members understand their options and prepare for retirement in the decumulation phase. For example, they provide one to three day retirement preparation seminars that can help considerably. I do still think, however, that individuals are not equipped to make many of these decisions. And you can put design features into DC plans that would help members better with the decision making.

Q: Could you give me an example of one or two of those?
A: Auto enrollment, auto escalation, and the design feature that we were just talking about — variable pensions — that would assist members with decision making in the decumulation phase would help.

Q: What role can annuity purchases play using all or part of the money in the plan members, DC account or RRIF to enhance the orderly draw down funds after retirement?
A: Annuities are expensive when the person is first retiring. However, I would definitely consider purchasing an annuity after about my mid 70’s. At that point, the insurance element becomes more interesting and significant because you don’t know if you’re going to live a few more years or a couple of more decades.

And the financial impact of living 2 or 20 years more is huge. The security that an annuity can give becomes much more worthwhile. So one strategy could be to separate your savings into two buckets: A: the amount you will need at age 80 saved via the annuity and B: the RRIF or the amount you’re going to spend between now and age 80. This is a bit easier to deal with, because the time frame’s better defined.

Q: That’s interesting. So do you have any other comments or suggestions that people are approaching retirement with a DC pensions or group/individual RRSPs to think about?
A: Well, focusing on just the DC pension is helpful, but I do think it’s also an incomplete solution. If the person has properly saved for retirement, he/she doesn’t have just one DC or Group RRSP account.

Even if they combine savings from previous employers, the spouse probably has registered savings, both spouses might have their own tax-free savings account and they probably have non-registered money too.

All these sources of income must be coordinated so the individual can meet their retirement and personal financial goal. Either the person has to educate themselves to manage on their own or they need help in finding an appropriately qualified financial adviser to assist them.

Right now in Canada, the price of such assistance is, in my view, unreasonably high. I also feel that many financial advisers do not have much experience with effective decumulation of retirement savings. Individuals have to look hard to find the right person.

Well, thank you very much. I really appreciate that you spoke to us today, Karen.

You are very welcome. It’s a pleasure, Sheryl. Thank you for asking me.

—
This is the edited transcript of an interview conducted by telephone in July 2015.

By Sheryl Smolkin

Everyone wants a raise and to make more money. One of the easiest ways to do that is to take advantage of your employee benefits. Here’s a checklist that can help you unlock the full potential of your workplace benefits.

1. Maximize retirement savings
   Many employers match employee contributions to Saskatchewan Pension Plan, the company pension plan or Group RRSP by as much as 5 or 6 per cent of their employees’ salary. Over time it’s worth a bundle.
2. Consider company stock
   Your company may have a payroll deduction plan that lets you buy shares at a discount. It is a taxable benefit and any decision to buy company stock should be part of your overall investment strategy. When Nortel failed, many employees who owned company shares lost both their jobs and a significant chunk of their nest eggs.
3. Submit all medical bills
   Often your pharmacy and dentist will submit bills directly to your insurance company. However, other bills must be submitted by you. Check out your plan to see what’s eligible, keep the receipts and submit them. Even small amounts add up.
4. Coordinate benefit plans
   If you and your spouse, or partner, have benefits make sure they are co-ordinated. Instead of getting a portion of your bills paid, you may be able to collect it all by using both. If a root canal costs $1,000 and your company only pays half, you have a lot to lose.
5. Health Care Spending Account: Use it or lose it
   Health Spending Accounts are a popular way for employers to give employees benefits choice. The company provides a lump sum, say $500, which can be used to pay for things not fully covered by the basic medical plan. Check your benefits information to understand how your HSA works. Also make sure to read and act upon statements or emails advising you that your HSA balance will be forfeited if it is not used by a certain date.
6. Monitor your maximums
   Make sure you know how much you can spend each year for dental work, physiotherapy, massage therapy, orthotics or glasses. Time your appointments and purchases accordingly.
7. Maternity and parental leave top up
   Ottawa pays up to $501 a week for 50 weeks of parental leave, after a two-week waiting period. Many companies pay full salary for the waiting period and top up to 95 or 100 per cent of salary. To be eligible for the government and company benefits you have to accumulate at least 600 hours of insurable employment in the previous year or since you lasted collected benefits.
8. Employee Assistance Plan
   Employee Assistance Plans offer a lot of value. They are available at no cost to you by telephone 24/7. Getting the help you need when you need it is priceless if it means you can function well enough to keep your job or hold your family together in a crisis.
9. Tuition reimbursement
   Many companies will pay for tuition if the course is approved and you pass. If your employer is willing to fully or partially fund an Executive MBA, you’ve really hit the jackpot. The 2013/2014 fees for a distance MBA from Athabasca University can be up to $50,000.
10. Get fit at work
    Take advantage of in-house gyms, sports teams and wellness challenges to get fit for free. Working out is also more affordable if your employer has negotiated a corporate rate at a fitness club and/or subsidizes fitness club memberships.
11. Use up your vacation days
    Your company probably has restrictions on unused vacation that can be cashed out or carried over to the next year. Check the rules and use them up.
12. Corporate travel
    Corporate travel can be more of a pain than a perk if it takes you away from home for long periods. However, business travelers rack up a huge number of airline points. Some companies allow employees to charge travel to personal credit cards and retain airline points for personal use. And airline points you earn on the job are not a taxable benefit. Also, if you are going somewhere interesting and your hotel room is paid for, you may be able to take your family along on a vacation for a fraction of the normal cost.

Do you have tips for employees to maximize their use of employee benefits? Share your tips with us at http://wp.me/P1YR2T-JR and your name will be entered in a quarterly draw for a gift card. And remember to put a dollar in the retirement savings jar every time you use one of our money-saving ideas.

If you would like to send us other money saving ideas, here are the themes for the next three weeks:

06-Oct	Seniors	Colleges, universities offer free tuition for seniors
10-Oct	Thanksgiving	Paying it forward: Volunteer opportunities
17-Oct	Halloween	Cheap and cheerful costumes, snacks

By Sheryl Smolkin

SPP, RRSP, Group RRSP, TFSA. This alphabet soup of acronyms represents only a few of the most common retirement savings options available to Canadians.

Other important retirement savings vehicles beyond the scope of this blog include employer-sponsored defined benefit pension plans, defined contribution pension plans and hybrid registered pension plan designs.

Where you chose to save your money and how much you save each year is an individual decision based on your disposable income and your longer-term financial goals. Because each type of plan has different contribution levels, tax consequences and withdrawal rules, it often makes sense to contribute to more than one kind of savings vehicle.

For example, you might decide to:

• Contribute to the Saskatchewan Pension Plan to ensure you have a stream of income at retirement.
• Participate in the Group Registered Retirement Savings Plan sponsored by your employer to get the benefit of employer matching of your contributions.
• Save your “emergency” or “rainy day” fund in a TFSA.

To help you understand and prioritize your retirement savings, here are some key features of each of these program. SPP and RRSP contributions for 2012 must be made by March 1, 2013 to be eligible for a tax deduction.

In all cases, you should consult your financial advisor and obtain more detailed information about each type of program before making savings and investment decisions.

Saskatchewan Pension Plan 

SPP is the only pension plan of its kind in Canada. It is a voluntary defined contribution plan open to anyone between the ages of 18 and 71. Employers who wish to make SPP available as an employee benefit can set up a group plan. Often employers with group plans match employee contributions up to a specified amount selected by the company.

SPP Key Features

Savings objectives:	Retirement savings.
Contributions:	Maximum contributions of up to $2,500/year if RRSP contribution room is available. Up to $10,000/year can be transferred in from another RRSP. No minimum payment. Contribution schedule and payment method at the member’s option.
Tax treatment:	Contributions are tax deductible. Tax is paid on benefit payments after retirement.
Investments:	Active members can invest in a professionally-managed balanced portfolio intended to maximize earnings and minimize risk or a short-term fund geared to capital preservation. Investment returns in the balanced fund have averaged 8% over the last 26 years and annual fees have been around 1%.
Withdrawals:	SPP contributions are locked-in within 6 months of joining and earn interest until the member retires.
Portability:	Membership in SPP can continue regardless of where the member resides or works throughout his career.
Retirement:	SPP members can elect to retire (start receiving benefits) as early as age 55 and no later than the end of the year they reach age 71. Members can elect to receive a pension from the fund, transfer the lump sum in their account to another locked-in account with a financial institution or a combination of both.

Registered Retirement Savings Plan 

Any person currently working in Canada is eligible to open and contribute to an RRSP until the year he/she turns 71 providing the individual has contribution room and files Canadian taxes. An RRSP account can be opened at any financial institution such as a bank, credit union and most investment houses.

RRSP Key Features

Savings objectives:	Retirement savings. Home purchase, education (see “withdrawals” below)
Contributions:	Until the year the taxpayer turns 71, contributions of up to 18% of earned income from the previous year can be made up to $22,970 in 2012 ($23,820 in 2013.) RRSP contribution room can be found on line (A) of the RRSP Deduction Limit Statement, on taxpayer’s latest income tax notice of assessment or notice of reassessment.
Tax treatment:	Contributions are tax deductible. Tax is paid on the full amount of withdrawals before or after retirement.
Investments:	RRSPs can be self-directed, or administered by a bank or financial institution. Generally, the types of investments permitted in a in a RRSP include: Cash Mutual funds Securities listed on a designated stock exchange Guaranteed investment certificates (GICs); Bonds; and Certain shares of small business corporations. The earnings record and investment fees charged will vary and investors must do their own due diligence.
Withdrawals:	RRSP contributions are not locked in. However, when funds are withdrawn from an RRSP, the contribution room is lost. The Homebuyer’s Plan and Lifelong Learning Plan allow RRSP withdrawals and repayment in specified circumstances.
Portability:	Membership in an RRSP can continue regardless of where the member resides or works throughout his career.
Retirement:	Funds in an RRSP can be withdrawn at any time and tax is payable on the full lump sum. Funds that are not withdrawn by the end of the member’s 71st year can be used to purchase an annuity or transferred into a registered retirement income fund. There are provincial pension and federal income tax rules about the maximum/minimum amounts that must be withdrawn each year.

Group RRSPs

Some employers establish Group RRSPs as an employee benefit. Often employers with Group RRSPs match employee contributions up to a specified amount selected by the company. They also may be able to negotiate lower fees for similar investments than fees charged to individuals by retail financial institutions.

Employers may restrict withdrawal of RRSP contributions by active employees except in extenuating circumstances, by withholding employer contributions for some period of time after a withdrawal is made.

An employee who changes jobs will not be able to continue in the group plan but the funds can be transferred to an individual RRSP with no tax consequences. However, the available investment options and the investment fees may not be as attractive as in the Group RRSP.

Tax-Free Savings Account

TFSA stands for Tax-Free Savings Account. Like an RRSP, a TFSA can be set up at a financial institution such as a bank, credit union, trust or insurance company. 

TFSA Key Features

Savings objectives:	Saving for any short or long term objective including retirement.
Contributions:	Up to $5,500/year beginning in 2013. Previously, $5000/yr
Tax treatment:	Contributions are not tax deductible but investment earnings accumulate tax free. Any funds withdrawn are also tax free.
Investments:	Generally, the types of investments that will be permitted in a TFSA are the same as those permitted in a RRSP. This would include: Cash Mutual funds Securities listed on a designated stock exchange Guaranteed investment certificates (GICs); Bonds; and Certain shares of small business corporations. The earnings record and investment fees charged will vary and investors must do their own due diligence.
Withdrawals:	Funds can be withdrawn at any time. Withdrawals will be added to the member’s TFSA contribution room at the beginning of the following year.
Portability:	Membership in a TFSA can continue regardless of where the member resides or works throughout his career.
Retirement:	Federal income-tested benefits and credits such as: Old Age Security (OAS) benefits, Guaranteed Income Supplement (GIS), or Employment Insurance (EI) benefits will not be reduced as a result of the income earned in a TFSA or amounts withdrawn from a TFSA.

Have you made your 2012 SPP contribution yet? Are you also contributing to an RRSP or a TFSA? Send us an email to so*********@sa*********.com and tell us about how you are saving for retirement and your name will be entered in a quarterly draw for a gift card.

If you would like to send us other money saving ideas, here are the themes for the next three weeks:

21-Feb	RRSP/SPP deadline	How should you invest your retirement savings?
28-Feb	Debt Reduction	How to eliminate debt
7-Mar	Airline points	Which kind of airline points are better?

Also see:
SPP vs. TFSA
Understanding SPP annuities
The Wealthy Barber explains: TFSA or RRSP?
RRSP vs. TFSA: Tim Cestnick on where to put spare dollars
To TFSA or to RRSP?
TFSA vs. RRSP – Clawbacks & income tax on seniors
TFSA vs. RRSP – Best Retirement Vehicle?