5 Reasons Why Your Teamsters Canadian Pension Plan Provides More Than an RRSP
Saving for retirement isn’t easy. There are complex options to choose from, all with different levels and types of risk, costs, and structures. Registered Retirement Savings Plans (RRSPs) are one of the best tax-assisted vehicles available to help save for retirement, especially for those without access to a pension plan. But do you know how your pension plan, the Teamsters Canadian Pension Plan (TCPP) compares to the typical RRSP? If not, read on, as you may be surprised.
Your plan, the TCPP, is more effective than an RRSP for many reasons:
- Professionally Managed Fund – Unlike the average person who invests in an RRSP, the Plan is a professionally managed fund meaning it has access to a wider range of investments and knowledgeable advisors, leading to potentially higher investment returns and in turn, higher pensions.
- Lower Costs – Investment management fees can be significant when you invest in an RRSP, ranging from 2.0% to 2.5% of the value of your assets each year. Since costs can be spread over a larger membership base (TCPP currently has about 11,900 members), the investment management fees are significantly lower on a per-member basis under the TCPP.
- Pensions for Life – Under the TCPP, there is better retirement protection, as opposed to an individual RRSP where funds may run out while the person is still living.
- Greater Predictability of Pension Benefits – A defined benefit plan design, like TCPP, allows for better retirement planning. An RRSP will indicate the value of your pension but not exactly how much you will receive each month whereas as a member of the TCPP, which has a well-defined formula, you will know with greater confidence the targeted amount of your monthly pension at age 65.
- Ability to Withstand Reductions in value of Assets – Potential reduction in assets due to volatile markets are managed in the Plan as a collective group which provides more funding stability, whereas, in an RRSP, it is more limited, particularly if an individual is close to retiring and the individual has limited contribution room.
The TCPP operates under a collective approach, whereby risks are shared – overall you get a higher pension, a more stable and predictable pension and … less stress about retirement!