Group Pension Plan

A Group Pension Plan is a type of employer-sponsored retirement plan that provides eligible employees with a structured and tax-deferred way to accumulate income for retirement. It is a registered pension plan (RPP) governed by federal or provincial pension legislation, and typically requires contributions from the employer, the employee, or both.

Group pension plans fall into two main categories:

• Defined Benefit (DB) Pension Plan: Guarantees a specific retirement income based on a formula that typically includes earnings and years of service.
• Defined Contribution (DC) Pension Plan: Retirement income depends on the amount contributed and the investment performance of those contributions over time.

Key Features of a Group Pension Plan

Additional Considerations

• Group pension plans are more regulated than Group RRSPs, and often include vesting periods, funding requirements, and disclosure rules.
• When an employee leaves the company, locked-in pension funds are usually transferred to a locked-in retirement account (LIRA).
• Group pension plans are designed for long-term retirement savings and are generally not accessible for early withdrawal or short-term needs.

Summary
A Group Pension Plan offers employees a disciplined, long-term method of saving for retirement with employer involvement. Whether structured as a Defined Benefit or Defined Contribution plan, it provides tax advantages, professional plan oversight, and potential employer contributions. Compared to other group retirement options, such as Group RRSPs, pension plans offer more rigid regulation but stronger protection for long-term retirement income.