Meredith Brown wanted to make sure that her company had the best group RSP possible.
As vice-president of human resources and national operations for Coinamatic, she guided her company through a review of its plan options early last year that led Coinamatic to switch providers. "We discovered that there were significant advantages available, such as broader investment choice and significantly lower management fees," Ms. Brown said. "We also now have greater employee support and planning advice with our new providers."
Is it time to take action on your group RSP? With a little push, perhaps your HR executives can find similar improvements for your company. If your plan isn't up to par - and I will show you how to find out - you need to get your company to make it better.
Many Canadians working for mid- to large-sized companies have a group RSP or a defined contribution pension plan. These plans have largely replaced the traditional defined benefit pension plans, which feature steady monthly income. As important as the pension might have been for your parents, the group RSP could be just as important to you.
So why is it that so many people don't pay close attention to their company pension?
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By the time you are retired, if you have had a group RSP in place at your (various) workplaces over the span of your work life, it could easily be worth several hundred thousand dollars. This is serious money, and a serious part of your retirement plan. Here are some of the key issues you need to consider:
1) What fees are being paid within the funds in your group RSP?
Many company plans come with high management fees. The people making the decisions on your behalf may not be aware that they can demand and get lower fees.
Many plans come with fees near 2 per cent on their mutual fund holdings. If your plan has fees that high, with limited investment options, you are better off moving your money out, as this is ridiculously high for a group plan. Most people have no idea what fees they are paying. You need to find out by asking your plan administrator.
2) How broad are you in your investment options?
In some plans, you have access to the full range of investments, from very safe investments to small company stocks to international funds. If your choices are limited to only a few types of investments, you need to demand better. This is your pension money, after all.
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3) What has the performance been versus other related options? Is it much better than average (in the top 25 per cent of performance vs. other funds) or is it much worse than average?
You can usually find this out by looking at the website Morningstar.ca. Your pension deserves at least average performance. Poor performance from your pension is something that needs to be changed.
4) What kind of guidance or advice have you received on your group RSP investments?
Another area of concern is that most people want guidance on investments but often receive little from their group retirement plan providers. Why is this? Shouldn't the provider of these investments and services also give a reasonable degree of advice to those who take their retirement pension seriously? A 30-minute seminar once a year to a group of 100 employees simply isn't enough.
5) Are you "trapped" in these plans, or is there an amount that you could potentially move out of the plan?
Who says your money has to stay in your plan if your investment options, fees and performance are less than stellar? Not that you will be told this, but in many cases, much of your plan may be transferable to an RSP account that you can control, either directly or through your adviser. Switching may not be in your best interest if your group RSP is run well, but if not, why keep more money in there than is necessary?
This doesn't mean you should avoid the benefits of having your company match your retirement contributions. By all means, take advantage of the 25-per-cent, 50-per-cent or 100-per-cent matching contribution that your employer provides. However, once the matching has been done, there is no longer much benefit to keeping the assets there.
So what do you do if you think your plan has high fees, poor investment options or poor performance?
You need to encourage your senior management and HR executives to review the company's plan and to make it better. It can be done fairly easily. To help with the process, check out " 5 Tips to Getting a Great Group RSP for Your Company." Send these tips to your HR executives and ask them to read them. Hopefully they will help them to realize the easy ways they can lower fees and get better investment options for themselves and for you.
Ted Rechtshaffen is president and CEO of TriDelta Financial Partners, a firm that provides independent financial planning advice. He was vice-president of business strategy at a major Canadian brokerage firm and found that the interests of the client were often not aligned with the interests of the adviser or the interests of the company.
This is part eight in a series that looks inside the financial services industry at what advisers tell their clients and - more importantly - what they don't.
Other articles in Ted Rechtshaffen's Adviser Secrets series:
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