First and foremost, it is important to clearly define the goals of both the employer and the employees in order to choose the most appropriate plan. Keep in mind that one plan is only better than another to the extent that it meets the needs of both parties.

For example, an RRSP is a convenient payroll deduction savings vehicle for employees while a registered pension plan allows the employer to play an active role in employee retirement planning. In addition to the tax benefits it offers, an RPP also helps the employer recruit and retain the most qualified employees.

A comparative table summarizes the main features of the major group retirement savings plans.

Group RRSP: Main Advantages
 

• A group RRSP is an excellent tax sheltered plan from which members can still make (taxable) withdrawals at any time. The main advantages of a group RRSP over an individual RRSP include the following:
   
  • Generally lower fees compared to mutual funds, making for a higher overall return on investment
  • Immediate at source income tax reduction for increased take-home pay
  • Disciplined savings for participants
    
    
• This plan offers employees greater flexibility upon retirement, as they can choose between a life annuity, a registered retirement income fund (RRIF), a cash payment, or a combination of these options.
• A group RRSP can be very advantageous when the employer prefers not to make contributions for employees.
• The employer is also not obliged to meet the various conditions the government imposes on registered pension plan sponsors, such as the requirement to set up or maintain a pension committee. 
   

Defined Contribution Plan: Main Advantages
 

• Since this is a kind of compulsory savings plan, it provides participants with a retirement income over and above the income from public plans.
• This plan can be combined with a deferred income program and definitely helps the employer attract and retain the best employees.
• The key advantage is that employer contributions do not count as a salary increase like with a group RRSP. This eliminates the various payroll taxes that would otherwise apply to these amounts.
• The legislative provisions applicable to this type of plan (impossibility of a cash withdrawal, the obligation upon retirement to purchase a joint and survivor annuity, etc.) offer protection that does not exist for RRSPs. Employers seeking to contribute actively to the well-being of their employees at retirement will therefore prefer this type of plan.
• In some jurisdictions, a special kind of defined contribution pension plan, the Simplified Pension Plan (SPP) is available. In these plans, the insurance company is the legal administrator of the pension plan, thereby lightening the employer's workload.
   

Defined Benefit Plan: Main Advantages
 

• A defined benefit plan not only guarantees retirement income for participants, but also helps the employer attract and retain the best employees.
• As the name implies, since benefits are predetermined and are generally based on the salary level for the five years preceding retirement, this plan is better suited for participants nearing retirement than for younger and more mobile employees. 
   

Defered Profit Sharing Plan (DPSP): Main Advantages
 

• A DPSP is an excellent choice for employers who want to provide their employees with an incentive to work towards the goals and the success of the company. Contributions are directly linked to company profits.
• In addition, it does not involve a permanent financial commitment since the employer does not have to contribute during a financial year in which the business suffers a loss.
• Employer contributions are not locked-in. Participant access to contributions is not permitted during employment and, depending on the employer's specifications, can be restricted for up to two years of participation upon termination of employment.
• A DPSP is also a perfect complement to an RRSP. Whereas employer contributions to an RRSP are considered part of an employee's salary and therefore attract various payroll taxes, contributions to a DPSP (and fees) are tax-deductible as employer operating costs and, like an RRSP, deposits and investment income are tax-sheltered.  
   

Comparative Chart of the Main Types of Retirement Plans

* In Quebec only
** In Quebec, if employees have investment control an investment policy is not required