Employers sponsor (set up at work through payroll) group savings plans for their employees to save for retirement. The most popular option for workplace savings is a Group RRSP (registered retirement savings plan) or a Registered Pension Plan. Typically, employers contribute to these plans along with the employees, making them extremely desirable.
The popular choice among Canadian employers wanting to help their workers save for retirement - a group RRSP is the collection of individual RRSPs that make up the group. Group RRSPs may be administered by any number of registered financial institutions. Employer contributions in Group RRSPs are usually treated as additional salary and thus, create additional payroll tax for employers who sponsor them. RRSP savings are intended for retirement, but CRA allows holders to deregister amounts (withdraw money) from an RRSP. Amounts withdrawn are treated as income and tax will be owing.
DC pensions are the workplace pension plans of today. Pensions are subject to Federal or Provincial pension legislation and the Income Tax Act. In this type of pension, the contributions are known and the outcome (pension) won’t be known until retirement, or earlier. Employer contributions into DC pensions are separate from salary and thus do not create additional payroll tax; employee contributions are made pre-tax. Once contributions are locked-in, withdrawing money from these pension plans is limited to specific situations of need and circumstance, ensuring income in retirement.
The Canada Pension Plan is sponsored by the Federal Government of Canada and every working Canadian contributes to it with required CPP contributions on our paycheques. CCP contributions made while employed, will provide Canadians with a pension in retirement, or before.
Canada Student Loans are offered by the Government of Canada to help students pay for post-secondary education at a designated college, university, or other post-secondary institution. Government student loans are based on assessed financial need.
Six months* after you leave school, you are required to begin repaying your student loan. Whatever repayment schedule you arrange with your lender will dictate your required monthly payment for the repayment of your student loan. Having both federal and provincial student loans would likely result in two required monthly payments.
*The six-month grace period for paying back loans is called the ‘six-month non-repayment period’.
The rate which is charged or paid for the use of money your lender has advanced. An interest rate is often expressed as an annual percentage of the principal. It is calculated by dividing the amount of interest by the amount of principal. Interest rates often change as a result of inflation and Federal Reserve Board policies.
The length of time your lender requires for the full principal to be repaid.
The Canada Revenue Agency allows you to claim a non-refundable tax credit based on interest you have paid on student loans. However, only interest paid on loans received under the Canada Student Loans Act, the Canada Student Financial Assistance Act, and similar territorial or provincial programs qualify. If you have private, foreign, or any other type of student loans, the interest is not deductible. Additionally, if you combine student loans from any of the approved sources with an unapproved type of loan, you cannot claim the student loan tax credit. Report your qualifying student loan interest on line 319. This non-refundable tax credit helps to reduce the tax you owe but cannot result in a refund. If you don’t need the deduction, the CRA allows you to carry it forward for up to five years, meaning you can claim it on future tax returns.