# DCPP vs GRSP



## Maj34 (Oct 7, 2011)

Hi all, 

My old employer who made contributions to my individual RRSP (which is a TD e-Series). My new employer offers a DCPP (defined contribution pension plan) and/or a group RRSP.

I've been trying to research these two options but I'm really struggling to understand which is best. Unfortunately a google search of "DCPP vs GRSP" has been very unfruitful.

Here's what I know about my employer's two choices so far: 
- The will invest 5% for me in either plan
- I cannot make additional contributions to the DCPP, but can to the GRSP.
- I get to choose the funds in either case - which look great - much less than 1% MER for the most part.
- The DCPP becomes locked in after 24 months. It isn't accessible until I'm 55.

One question I have: Does a DCPP contribution count towards my RRSP contribution limit? I know the GRSP does. 

I'm just a little confused about the difference between the two options. I've read through about 70 pages of literature provided by my employer and the associated financial institution (SunLife) but the only real difference I see is that the DCPP is locked in; this matters very little to me since I'm a very disciplined investor and will not touch my GRSP or individual RRSP until retirement.

I'm wondering if anyone out there can offer any advise (or perhaps point me in the right direction). 

Thanks, 
M.


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## GoldStone (Mar 6, 2011)

In practical terms, DCPPs and Group RRSPs are very similar. Off the top of my head I can only think of two key differences:

1. Group RRSP contribution counts towards your RRSP deduction limit in the current year. DCPP contribution results in Pension Adjustment that reduces RRSP deduction limit the next year.

The difference means very little, except the first year you join DCPP. In that first year, you can make your DCPP contributions *and* maximize your self-directed RRSP at the same time.

2. If/when you leave the company, you can roll Group RRSP into your self-directed RRSP. You can't do that with DCPP. You can only transfer DCPP to a locked-in account such as LIRA or LIF.


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## Maj34 (Oct 7, 2011)

Hey thanks Goldstone, 

Think I'll go with the GRSP option; I don't plan on leaving this company anytime soon since I just started, but you never know what will happen in a few years.

I've been working on maxing out the RRSP deduction limit, but am not quite there yet, so I feel like my best choice is to continue working on that..


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## GoldStone (Mar 6, 2011)

Double-check the fees. I know you said they are the same.

The reason I say this:

We have multiple plans at work: DCPP, Group Registered, Group Unregistered. The base fund fees (called Investment Management Fees or IMFs) are the same in all plans. Each plan charges administrative fees on top of IMFs (as a percentage of invested assets). In our case, DCPP administrative fees are lower than group plan fees.


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## Maj34 (Oct 7, 2011)

Thanks!

Will definitely look in to this!


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## Lephturn (Aug 31, 2009)

Down the road when you need to roll that into your own accounts, the GRSP will be much more flexible and quick.

Dealing with a Locked-In Retirement Account (LIRA) - which is what your DCPP would be rolled into - is a real pain. LIRAs operate under either federal or provincial regulations/legislation and hence they need different forms and details to transfer them depending on where it was registered and under what legislation. I know this because I have a little one from a job many years ago - trying to do something like change brokers down the line it becomes a big hassle. Moving RRSP accounts between brokerages/banks etc. is conventional and straight forward - not so with the LIRA. For example in Questrade I could do everything online to set up the transfer of an RRSP account from IG to Questrade - but with the LIRA I had to print, sign, and mail stuff. On top of that it turned out IG had set it up wrong (It was a LIRA under Nova Scotia legislation but they set it up as Federal) so the transfer failed and I had to do the entire thing again from scratch.

Also check on your withdrawal rules - the GRSP plan I have at work lets me yank everything (both my contribution and my employers) once a year for no cost and with no limitations. So I can regularly yank it all out of there and into my own self directed RSP accounts where I can more easily manage it as part of my overall retirement portfolio. I also enjoy much better rates and fees where the rest of my family's investments are held than I would in this company plan.


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## Eclectic12 (Oct 20, 2010)

Lephturn said:


> Down the road when you need to roll that into your own accounts, the GRSP will be much more flexible and quick.
> 
> Dealing with a Locked-In Retirement Account (LIRA) - which is what your DCPP would be rolled into - is a real pain... Moving RRSP accounts between brokerages/banks etc. is conventional and straight forward - not so with the LIRA....
> 
> Also check on your withdrawal rules - the GRSP plan I have at work lets me yank everything (both my contribution and my employers) once a year for no cost and with no limitations...


All good points but YMMV. 

My personal RRSP took six weeks to transfer within the same financial group to go from bank to broker. My first LIRA was transferred from a separate insurance company in three weeks, no issues. My second LIRA from a separate insurance company had a series of errors on the forms slowing down the process.

As for GRSP, I'll have to check again as I believe the providers have been changed but the last time I checked, there was a $150 fee to transfer out.


Cheers


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