Thinking about providing your employees with a Group Retirement Savings Plan (GRSP)? It’s a great idea, and here’s why.
One of the most significant challenges for employers in Canada is the ever-growing labour shortage and resulting war for talent. Though it’s difficult enough to stay afloat when the economy continues to gasp for air, the problem is compounded when employers can’t find strong talent to perform the work that needs to be done to generate revenue. Some people refer to the current employment climate as the “great resignation”. This is characterized by a growing number of people looking for new jobs, rising turnover rates, and more people choosing to retire instead of continue working. For a lot of employers, it might seem counter-intuitive to spend more money under these circumstances. However, there is actually a critically important reason to spend – or rather, invest – in times like these. Bear with me as I explain.
Canadians Are Stressed About Money
According to the 2023 FP Canada™ Financial Stress Index, two out of every five Canadians (40%) say that money is their number one source of stress, up slightly from 2022 (38%). The survey also found that:
- Two in five Canadians (44%) report feeling less hopeful about their financial futures now than a year ago
- One in three (36%) say financial stress is leading to anxiety, depression, or mental health issues.
Unsurprisingly, most Canadians are not feeling confident about their financial readiness for retirement. A new CIBC poll finds that the average age at which Canadians hope to retire is 61 but one-half of non-retirees (51%) are unsure about whether they’ll be able to reach that goal. The poll also found that:
- Two-thirds (66%) of non-retired Canadians worry about running out of money during retirement
- Less than half (41%) of those feel confident they are saving enough to achieve their retirement goals.
Despite these worries, the vast majority of non-retired Canadians (85%) do not have a formal financial plan for retirement.
A GRSP Can Help You Win the War for Talent
You might be wondering why I’m bringing attention to Canadians’ concerns about money in a blog about the challenges that the labour shortage is creating for employers. The reason is very simple: you can help alleviate some of the stress and anxiety that your current and future employees are experiencing by providing them with a group retirement savings plan (GRSP).
A GRSP is similar to an individual registered retirement savings plan (RRSP) except that a GRSP allows employees to have savings regularly and automatically deducted – pre-tax – from their paycheques. Each dollar they contribute to their GRSP lowers their taxable income by the same amount. It’s an easy way for them to save for their retirement goals, and it generally costs them less in fees than they would pay for an RRSP. This is because interest rates and investment management fees are based on the combined purchasing power of your group plan. This almost always results in lower fees than your employees could get on their own. And, if you match their contributions, their retirement savings grow a whole lot faster. All of this amounts to a clear and definite win for your valuable employees.
Employers Benefit From a GRSP Too
But providing your employees with a GRSP benefits you too – a LOT. For one thing, a GRSP makes you a much more attractive employer – which goes without saying is a really big deal in the current war for talent. A recent survey found that the vast majority (84%) of Canadian employees consider an employer-sponsored retirement plan to be a critical benefit so these days, most employers cannot afford to go without providing their employees a GRSP. It’s simply too costly a thing to forgo at a time when employees have multiple options about where they want to go to work each day.
In addition, a GRSP helps drive employee productivity. This might seem a bit odd on the surface but when you consider that 80% of employers report that their employees’ personal financial issues impact their job performance somewhat, very much or to an extreme degree, it makes a lot more sense. When employees know that money is being set aside each month to help secure their financial futures – including money set aside for them by their employers – it helps reduce their stress and, by extension, helps them better focus on their tasks at hand.
And, very importantly, employer contributions into an employee’s GRSP are tax-deductible as a business expense. This makes a GRSP an investment in your employees and your business, AND a tax-saving vehicle. Win, win AND win!
The bottom line is that for a number of really important reasons, a GRSP is so much more than a nice-to-have benefit offering to your team; it truly is a critical benefit that, very fortunately, benefits everyone. Want to learn more? Please watch this episode of CliffHangers with Benefits Associate Matthew Hill and me. Please also, as always, reach out. I’ll bring the coffee.
Danielle Roberge, B.Comm.
Group Retirement Consultant
Wiegers Financial and Insurance Planning Services Ltd.
The opinions expressed are those of the author and may not necessarily reflect those of Manulife Securities Investment Services Inc.