Seven things to know about voluntary retirement savings

Your employer is telling you he is taking action: he is offering a voluntary retirement savings plan. You are delighted with the decision because you think that you will finally be able to put money aside for your golden years. So what do you know about VRSPs?

Here are 7 things you need to know.

• Auto-enrolment for employees
  As a worker subject to the VRSP, your employer will automatically sign you up for the plan. You don’t have to lift a finger. You can, however, opt out or ask your employer to change your membership. If you decide to opt out, take note that you will have 60 days to inform your employer once you have received the notice confirming your membership in the plan.
• Fewer decisions
  The plan has default options to limit the number of decisions you have to make, such as about the contribution rate and the investment option called “Lifecycle path.” The Lifecycle path establishes the level of risk based on your age and is adjusted as you approach retirement.
• Flexible contribution rate
  You can determine your contribution rate. However, if you do not choose a rate, a default contribution rate will apply. The rate is: 2% of your gross salary until the end of 2017; 3% in 2018; 4% as of 2019.
• Member contribution available anytime
  Your contributions are never locked-in, which means that you can withdraw them before retirement. For example, you can use them to participate in the Home Buyers Plan (HBP) or the Lifelong Learning Plan (LLP), after you have transferred them to an RRSP.
  However, if your employer also decides to make contributions, those contributions will be locked-in and can only be used as of 55 years of age, thus generating retirement income for you.
• Tax advantages
  Since the contributions are deducted directly from your wages, you immediately start saving on taxes. As with RRSPs, the accrued amounts (capital and interest) remain tax‑sheltered as long as they are not withdrawn.
• Low fees
  The VRSP is a plan monitored by Retraite Québec and its administration costs are set by law. The plan’s low fees make it possible to increase retirement savings.
• Are you changing jobs? Keep your VRSP!
  If you change jobs, you can keep your VRSP and continue to pay contributions to it. The idea is that you can still take advantage of a low-cost plan. What’s more is that you can also transfer your VRSP to another retirement plan offered by your new employer or to a plan of your choice, if the provisions so provide.

Try our VRSP Calculator to find out right away how much you could set aside with this type of plan.