# RRSP Through Workplace - Limited Options - Lots of Target Date Funds



## bltman (Aug 12, 2010)

Anyone else here limited in their investment opportunities in their RRSPs by a workplace retirement planning program? My employer has one with Manulife and I need to use that to get matching funds from my employer. The options are very limited. The plan is very heavy on target date funds (MER of 1.15), has one money market fund, one fixed income fund, two Canadian balanced funds, three Canadian equity funds, one US fund, one international fund and two global funds. It also has 3 GIAs (their high interest account versions of GICs) with 1, 3 and 5 year options.

I chose the only 2 index funds offered (US Equity and CDN Bond 0.715 MER each) and then rounded it out with the lowest MER CDN Equity (1.015 MER) and the only Intl fund available (1.415 MER). I have looked into transferring the RRSPs out but the requirements are confusing and are a hassle.

What have other people done with these types of programs? 

Is there any value in target date funds? To me, they look like paying someone to do couch potato investing for you.


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## HaroldCrump (Jun 10, 2009)

I'm in the same situation as you are.
Our group RRSP is with a similar, large insurance institution.
The choice of funds is severely limited and all the available ones are high MER.
There are index funds with 1.5% MER and there's a money market fund with 1% MER - how much more comical can things get.
Anyhow, the saving grace is that this plan allows once a year withdrawal.
And that's what I do....keep accumulating in the money market fund and transfer out once a year.

Plan to plan transfer is your best way out.
The rules should be rather simple.
Make sure you request a "All in Cash" transfer and not an in-kind transfer.

And if you're gonna do this, don't be in equity funds (or even bond funds) because you could be in the red on the day the transfer is executed.


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## bltman (Aug 12, 2010)

At least the MER's on my plan's index funds are competitive and the other ones are at least reasonable. Our company has a "pension committee" that meets with the rep and selects the funds based on his advice. My other option is to join that committee with the goal of trying to get a couple more low MER index funds on there. If I can do that, I can leave my money in without hesitation.

By only being able to withdraw once a year and by parking it in the money market fund do you fell you are missing out on a little bit of growth during the year?


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## slacker (Mar 8, 2010)

Yes, if you want better products at lower MER, you'll need to do a direct transfer to your own RRSP account. You'll need to fill out form t2033:

http://www.cra-arc.gc.ca/E/pbg/tf/t2033/README.html

My group rrsp allows for transfer once a year at no cost. Your group rrsp may vary. Check for fine print and fees before hand.


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## Four Pillars (Apr 5, 2009)

The good thing about transferring out of group plans, is that they typically don't charge any transfer fees.

Like others said, just transfer out once in a while. I don't know if I would bother with once a year - as long as it happens occasionally you should be fine.


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## Ben (Apr 3, 2009)

HaroldCrump said:


> Make sure you request a "All in Cash" transfer and not an in-kind transfer.
> And if you're gonna do this, don't be in equity funds (or even bond funds) because you could be in the red on the day the transfer is executed.


I've been stewing for a while on transferring my group RRSP holdings to a discount brokerage for better product selection.

Why "All in Cash", and not in-kind? 
Why the concern about equity or bond funds being in the red?

For background, I have a plain-Jane couch potato set of funds in group RRSP, and would probably set up the same (initially) at the discount brokerage.


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## Jungle (Feb 17, 2010)

I feel stuck with a defined contribution pension. (RPP) I'm told we are not allowed to switch investment companies. Our options are limited to the funds below, even though the company does sells a lot more funds than listed here. 

They consist of an overwhelming choice of:

ONE US mutual fund (0.801) MER, 
ONE international equity fund (1.301) MER
TWO Canadian Equity funds (1.151 and 0.801) MER
ONE bond fund (0.451)
ONE money market fund (0.451) MER
TWO balanced fund (what are those?) (0.551 and 1.151) MER

WHen asked if I could purchase the other funds they sell they said no. Apparently my employer has made an agreement with this company to only use this fund. Apparently this allows them to provide "low MER's." They are not that bad, but certainly not the best. 

Although I am happy I have a paid pension, I am not satisfied the money is being invested efficiently. I guess you can't transfer a RPP?


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## HaroldCrump (Jun 10, 2009)

Ben said:


> I've been stewing for a while on transferring my group RRSP holdings to a discount brokerage for better product selection.
> 
> Why "All in Cash", and not in-kind?


A couple of reasons:
First, most of the funds available within a group RRSP plans are not the public mutual funds available to the market.
They have different MER than the public funds offered by the same institution.
They will not allow an in-kind transfer of those funds to an individual RRSP plan at another brokerage.
Similar to TD eSeries, I believe - you can't do an in-kind transfer of TD eSeries funds out of TD into a different brokerage.

I don't think these group RRSP plans allow you to purchase stocks, bonds and funds on the open market like a brokerage.
At least mine doesn't.
But if yours does, by all means do a transfer in kind.

Secondly, if you are following the annual transfer out policy, then just keep everything in cash or as close to cash as possible.
At the most, you are missing out on some growth for the contributions deposited earlier in the year.
I suppose your lost "opportunity cost" is not much, going by the performance of most mutual funds these days.



> Why the concern about equity or bond funds being in the red?


If you are doing an all in cash transfer, your funds could be down the day the transfer is executed.
You can't predict the day the transfer gets executed - it's not like a trade.



> For background, I have a plain-Jane couch potato set of funds in group RRSP, and would probably set up the same (initially) at the discount brokerage.


Have you checked whether those exact same funds are available publicly?
There may be _similar_ funds available, but not those exact same ones.
I have checked mine and they are different.
There is a public Canadian equity index fund available by the same company but it is not the same as the Canadian equity index fund inside the group RRSP.


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## Four Pillars (Apr 5, 2009)

@Harold - I don't agree with the idea of going to cash before doing a transfer. 

If the basic asset allocation will be the same in both brokerages, then I think you should stay invested in the market as much as possible.

If you are withdrawing money for a purchase (new house) then of course, you want to be in cash to lower the risk of the market.


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## HaroldCrump (Jun 10, 2009)

Four Pillars said:


> @Harold - I don't agree with the idea of going to cash before doing a transfer.
> 
> If the basic asset allocation will be the same in both brokerages, then I think you should stay invested in the market as much as possible.


Usually with group RRSP you may not have a choice.
The funds available to the group plan may not be publicly available, at least that's true in my case.
I cannot do an in kind transfer of those funds to another brokerage.
I'd believed that's true for many group RRSPs.


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## Four Pillars (Apr 5, 2009)

HaroldCrump said:


> Usually with group RRSP you may not have a choice.
> The funds available to the group plan may not be publicly available, at least that's true in my case.
> I cannot do an in kind transfer of those funds to another brokerage.
> I'd believed that's true for many group RRSPs.


Sorry, I wasn't clear. I was referring to your second point about keeping the contributions in cash until you transfer them out (which likely have to be in cash to complete the transfer).



> Secondly, if you are following the annual transfer out policy, then just keep everything in cash or as close to cash as possible.
> At the most, you are missing out on some growth for the contributions deposited earlier in the year.


Are you suggesting this to avoid the high fees of available mutual funds?


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## cardhu (May 26, 2009)

Ben said:


> Why "All in Cash", and not in-kind?


Further to HC’s answer, insurance-company-administered GRSPs often sell proprietary mutual funds that aren’t available from any other source but them ... sometimes that can be an obstacle to transferring in kind ... I’ve had two GRSPs in the past, this was an issue with one of them, but not with the other ... one was an insurance-company GRSP, and the other wasn’t ... if your particular GRSP uses funds that are also available through your discount brokerage (my non-insurance plan used plain-jane Trimark funds), then there shouldn’t be any problems with an in-kind transfer. 

I disagree with cashing out in advance of transferring, unless you’re going to do a major overhaul of your asset allocation anyway ... if your plan is to maintain the same allocations before and after transfer, then being out of the market for a couple of days offers less opportunity for the market to move against you than being out of the market for a couple of months. Either way, it’s a crap shoot, but if your strategy is to stay invested through thick and thin, then minimizing time out of the market would seem to be consistent with that intent. 



Jungle said:


> I feel stuck with a defined contribution pension. (RPP) I'm told we are not allowed to switch investment companies.


Not all plans offer the very generous transfer-out capabilities that others are referring to upthread ... I’ve had two GRSPs in the past, both with the same employer (they switched administrators) ... our choices were (1) join the GRSP, get matching contributions, and select from the limited offerings, or (2) opt out of the GRSP, forego the matching contributions, and go it alone ... we were free to transfer out if we chose to, and the Company was free to terminate further matches, if we did ... as far as I know, nobody chose option 2.


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## HaroldCrump (Jun 10, 2009)

Four Pillars said:


> Sorry, I wasn't clear. I was referring to your second point about keeping the contributions in cash until you transfer them out (which likely have to be in cash to complete the transfer).


Right, so it's related to the whole thing about funds within a group plan not being publicly available.
If that's the case, then the day your transfer is executed, you may be in the red.
If that date happened to be one like 6th of May this year or any of the days where we have > 100 pts. down correction, you could end up inadvertently losing money.


> Are you suggesting this to avoid the high fees of available mutual funds?


Yes, that too.
As I said up-thread, none of the funds in my group plan have less than 1% MER.
The money market fund in 1%.
A bond index fund is 1.10%.
Actively managed equity funds are all > 2%, and majority of those are closet indexers.
Those fees wither away any benefit of keeping the cash invested for such a short period of time (< 1 year for the first contribution and only a few weeks for the last set).

My primary objective with the group plan is to collect the employer match & protect my capital.


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## cardhu (May 26, 2009)

HaroldCrump said:


> If that date happened to be one like 6th of May this year or any of the days where we have > 100 pts. down correction, you could end up inadvertently losing money.


And you could end up inadvertently losing money by being out of the market for 60 days. Its just a coin-toss. Either way, you can't predict in advance which direction the market will move, and by how much, during the time spent out of the market ... the shorter the time period, the less opportunity for the market to make huge moves.


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## Ben (Apr 3, 2009)

Lots of good thoughts above, thanks.

I do know I have one of the best GRSP's in Canada, in a lot of ways. Couple thousand investment options, and no fees outside of the fund MER's, which for my vanilla index funds are in the 0.6-0.7% range. No fees to rebalance, buy, sell, etc. My employer carries the burden of any fees from such actions.

At Waterhouse, for example, if I hold index funds within an RRSP, what sort of fees could I see that I do not see in my current plan?


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## MoneyGal (Apr 24, 2009)

Just trade fees and an annual account admin fee. I personally pay $9.95 per trade and I think my ($135/year) account fee is waived. 

The other variable, as you've pointed out, is the MER. I use ETFs and I hold some stocks directly. I don't have any retail mutual funds nor do I hold any bonds right now.


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## Ben (Apr 3, 2009)

What constitutes a trade during a rebalancing activity?

Say 4 funds are held, with target allocations of 30/30/20/20 %.
Say one of the funds is sitting at 37.5%, and the others are 2.5% below their targets.

In order to rebalance, I'd send 2.5% from the overweight fund to each of the other 3 funds.

Question is, does this count as 3 trades, or can all three transfers be done on one grouped trade?

Bit of an amateur question I suppose, but this is what happens when one is sheltered from fees by a group plan for so long. 

Depending on the account balance, it might not take that long for the potential advantage of lower MER's to get chipped away by the new exposure to fees. Ultimately, probably not going to make a change for a couple of years until the mortgage is gone and more money is freed up to get serious about investing.


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## HaroldCrump (Jun 10, 2009)

Ben said:


> What constitutes a trade during a rebalancing activity?
> 
> Say 4 funds are held, with target allocations of 30/30/20/20 %.
> Say one of the funds is sitting at 37.5%, and the others are 2.5% below their targets.
> ...


Depends on two things - 1. the brokerage you are with and 2. the funds in question.

Most brokerages do not charge trading fees for non commissioned mutual funds, except under some circumstances (see below)*.
Some brokerages charge for mutual fund trades and so this would could as 3 trades.

Some funds have trading fees regardless of brokerage.

* Most brokerages will charge fees for fund sales within the first 90 days.
There may be other circumstances too.

I suggest read the fees section of your brokerage's website or prospectus carefully.
If still in doubt, call and ask.


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## MoneyGal (Apr 24, 2009)

You peeps are talking about several different things. 

Many, if not most group RRSPs will have funds that are not available to the general public. 

You may be able to get SIMILAR funds in a non-group RRSP account, but unless you are able to get the IDENTICAL fund in a retail version, you will not be able to do an in-kind transfer from your group RRSP to a non-group RRSP. 

This means you must do the transfer in cash, not in kind. So when should you convert your group RRSP holdings to cash? 

Should you just keep the group RRSP contributions all in cash, and only invest them once you've transferred the $ out? 

Or should you invest them in whatever funds are available through the group RRSP, and then move them to cash just before you "sweep" the contributions out to your self-directed RRSP? 

(Note: this only applies if you plan to sweep the contributions out. [When I was a broker, we used the term "sweep" to refer to the annual cleaning-out of a group RRSP to a SDRRSP.])

Asset allocation is a different conversation. This is just a tactical conversation about how to move funds from a group RRSP to a SDRRSP. The strategic conversation about asset allocation is a different thing.


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## MoneyGal (Apr 24, 2009)

Ooops. I was working on my home computer, which was open to this thread, but many posts ago. Looks like this has been sorted out previously, and not by me.


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## Jungle (Feb 17, 2010)

cardhu said:


> Not all plans offer the very generous transfer-out capabilities that others are referring to upthread ... I’ve had two GRSPs in the past, both with the same employer (they switched administrators) ... our choices were (1) join the GRSP, get matching contributions, and select from the limited offerings, or (2) opt out of the GRSP, forego the matching contributions, and go it alone ... we were free to transfer out if we chose to, and the Company was free to terminate further matches, if we did ... as far as I know, nobody chose option 2.


Thanks for your feedback. It's just a shame that they stick you with some of those high MER mutual funds. Ah well. Better to have a pension anyway.


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## bltman (Aug 12, 2010)

Glad to hear I am not alone with this. I looked into it today and I can only transfer my contributions without a fee once per year. I can never transfer the company's match unless I leave my job.  At least I do have 2 fund choices under .8 and the remaining ones are generally under 1.6


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## bltman (Aug 12, 2010)

bltman said:


> Glad to hear I am not alone with this. I looked into it today and I can only transfer my contributions without a fee once per year. I can never transfer the company's match unless I leave my job.  At least I do have 2 fund choices under .8 and the remaining ones are generally under 1.6


Reviving a thread of mine from a few months ago. As indicated above, I can transfer some money out of my workplace RRSP once per year without a fee. I plan to transfer to my bmo investorline RRSP account. Transfered amounts would be used to expand my new low cost ETF portfolio. What is the best time of year to do this transfer (or does it really even matter)?


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## Jungle (Feb 17, 2010)

bltman said:


> Reviving a thread of mine from a few months ago. As indicated above, I can transfer some money out of my workplace RRSP once per year without a fee. I plan to transfer to my bmo investorline RRSP account. Transfered amounts would be used to expand my new low cost ETF portfolio. What is the best time of year to do this transfer (or does it really even matter)?


Anyway you can transfer it in-kind? Could you buy a common mutual fund that BMO would accept just for the transfer?


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## bltman (Aug 12, 2010)

Jungle said:


> Anyway you can transfer it in-kind? Could you buy a common mutual fund that BMO would accept just for the transfer?


Nope. They are all institutional pooled funds for company retirement program purposes. To be honest, the funds they do offer are not that bad, but now that I have my investorline account open I can probably save about 0.5 MER by moving out once per year (though i will need to pay 9.99 for trades on investorline).


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## warp (Sep 4, 2010)

I have never had a Group or workplace RRSP, but know several people who do,,,and they ask for my adcive, ( for what thats worth)

I have always beeen amazed that these companies offer matching contributions ( of different amounts, percenatges etc), and then force their employees to invest in a limited choice of ( usually high mer) funds from whatever financial institution they chose to administer the RSP plans,

They seem to put very little thought in giving the employees options as to what to do with the RSP funds,,,maybe assuming that they have to "protect" their employees from themselves,or their own stupidity or lack of knowledge, by having financial "advisors" watch over the funds for them.

They also put lots of restrictions on how an employee might get this money into his or her own self registered RRSP.

As a shareholder in several life insurance companies, I suppose I should be glad about this, but the whole thing is just plain wrong....
although I guess an employee should be happy to accept this arrangement as part of the price for the "free" employer matching contributions.


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