# New RRSP plan at work, not sure if should participate



## brad (May 22, 2009)

For years, my company has offered a retirement bonus of a percentage of my salary, which allowed me to invest wherever I like. Starting next year, though, they're doing away with the bonus and offering a company match of up to 5%. The catch is that we have to use their RRSP provider, which is Industrial Alliance. I had a look at their website and the choices look terrible, with ridiculously high MERs. My inclination is to decline participation, because I don't want to give money to those sharks, but on the other hand I'd be walking away from free money (my company's match). I thought about just going with their GICs, but even those are terrible -- a 5-year GIC pays less than my regular savings account at Tangerine.

What would you do?


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## nobleea (Oct 11, 2013)

Free money is best. 5% is pretty good. Even if the MER's are in the 2-3% range, you're way ahead.
See if they allow you to transfer out to a self directed RRSP once in a while. Some companies allow that maybe once a year or similar.


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## brad (May 22, 2009)

Transferring out is a good idea, I didn't think of that. If it's not an option I might still walk away from it as on principle I hate giving money to firms like that.


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## lightcycle (Mar 24, 2012)

Be aware of any DSCs for early redemption if you are transferring out.


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## cainvest (May 1, 2013)

Hard to pass up an automatic 5% gain, I likely wouldn't. As already mentioned, try to find a way out (like a really short term GIC or something) and when/if you can transfer the money out to your own account, then it's a win-win.


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## MorningCoffee (May 8, 2013)

brad said:


> Transferring out is a good idea, I didn't think of that. If it's not an option I might still walk away from it as on principle I hate giving money to firms like that.


You are willing to walk away from doubling your money... so who will you be punishing?


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## GoldStone (Mar 6, 2011)

1. Never ever leave free money on the table. 5% match beats high MERs.

2. Check out GIC options in the plan. They may be quite decent. If so, invest the entire work plan in GICs. Invest in equities elsewhere. Treat all your plans as a single portfolio with one asset allocation.


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## brad (May 22, 2009)

MorningCoffee said:


> You are willing to walk away from doubling your money... so who will you be punishing?


Yep, I know, but I spent years negotiating grants and contracts for a university and we routinely walked away from million-dollar contracts if they violated our principles. I think principles matter. I'm not "punishing" anyone, it's just hard to stomach the thought of giving my money to a firm that does everything I've been taught to avoid as an investor.


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## brad (May 22, 2009)

GoldStone said:


> 2. Check out GIC options in the plan. They may be quite decent. If so, invest the entire work plan in GICs. Invest in equities elsewhere. Treat all your plans as a single portfolio with one asset allocation.


As mentioned in my original post, the GICs are awful. The rates for a 5-year or even a 10-year GIC are lower than what I can get for a regular savings account at Tangerine.


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## lightcycle (Mar 24, 2012)

GoldStone said:


> 1. Never ever leave free money on the table. 5% match beats high MERs.


Does it really? The 5% match is a one-time shot on the contribution only. The MER is levied annually on the entire amount.


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## GoldStone (Mar 6, 2011)

5% match doubles your money right off the bat. High MERs erode future returns, but doubled principal amount is still there. 

Of course, the best option is to take advantage of the match + transfer money elsewhere. I participated in a few different workplace plans. All allowed transfers out.


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## lightcycle (Mar 24, 2012)

My bad. For some reason, I was thinking it was a 5% *of* the contribution, not a 1:1 match of up to 5% of salary.


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## OnlyMyOpinion (Sep 1, 2013)

Taking advantage of a matching 5% is a no brainer one would think, but apparently not - this article in FP (Dec. 2) _"Canadians losing out on as much as $3 trillion in free-money DC plans"_ makes one wonder what the he** you have to do to get the general populace educated and committed to  looking after themselves. How big a hammer does it take to knock sense into people? http://business.financialpost.com/2014/12/02/canadians-losing-out-on-as-much-as-3-billion-in-free-money-defined-contribution-pensions/


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## Westerncanada (Nov 11, 2013)

I understand the aversion to MERS but how have these funds performed return wise ?.surely they must be doing fairly decent most reputable companies Would not offer a 100% match if the group provider was a poor performer?


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## indexxx (Oct 31, 2011)

There is no question that you should take advantage of it. (in my opinion). 

You are getting a 100% return guaranteed- the MER is negligible compared to that. I have a similar plan at work; although I am only allowed to put in 4%, they will match it with 6%, so I'm getting a 150% return. I look at it like a small guaranteed investment every month that I never miss out of my pay, and it's going to grow until I retire. I also get the tax benefit- and as I'm just about to use the HBP for a downpayment, the company's monthly contribution will make my HBP payments for me- essentially a free downpayment less the capital gains lost until it's paid back.

Yes, it hurts to pay those high MERs, but I looked at all the prospectus' of the provider (Great West Life) and realized that they actually have a couple of index funds and a REIT hidden in there- fees between 0i8 and 1.4%, or something like that. Not amazingly low MERs, but not bad, so I went with a couple of them. I figure that the returns on the segregated funds over time are not going to be astounding anyway, so I just set it and forget it, and do the rest of my real investing through Questrade.


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## brad (May 22, 2009)

Thanks, I probably will hold my nose and do it, but if they do allow transfers I'll certainly take advantage of it as frequently as I can without penalties.

My objection is not to paying the MERs or to being stuck in managed funds that are 70% likely to underperform my index ETFs over the long term. My objection is that I'd be supporting a business whose strategies I oppose and that I've worked hard to avoid in my self-directed RRSP. Imagine if someone offered you free money but told you that you had to give it to the drug dealers down the street. It kind of feels like that to me.


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## My Own Advisor (Sep 24, 2012)

GoldStone said:


> 1. Never ever leave free money on the table. 5% match beats high MERs.
> 
> 2. Check out GIC options in the plan. They may be quite decent. If so, invest the entire work plan in GICs. Invest in equities elsewhere. Treat all your plans as a single portfolio with one asset allocation.


Couldn't agree more with GoldStone with especially point #1.

@Brad, why don't you post your options here? Let the CMFers have a kick at it?


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## OnlyMyOpinion (Sep 1, 2013)

brad said:


> Thanks, I probably will hold my nose and do it, but if they do allow transfers I'll certainly take advantage of it as frequently as I can without penalties.
> 
> My objection is not to paying the MERs or to being stuck in managed funds that are 70% likely to underperform my index ETFs over the long term. My objection is that I'd be supporting a business whose strategies I oppose and that I've worked hard to avoid in my self-directed RRSP. Imagine if someone offered you free money but told you that you had to give it to the drug dealers down the street. It kind of feels like that to me.


Didn't mean to seem insulting above with 'hammer' comment. It's obvious you are considering all options here. The other consideration is that the contribution you & co would make to this plan will reduce the amount you can cotribute to your own RRSP (assuming you are max'ing out contributions) which messes up your allocations etc. 
Sounds like key considerations might be: i) is there a lower mer 'temporary' option (if they are giving you 5% and the mer is 2% you're only picking up 3% and putting your 5% into something you don't want), and ii) are annual transfers possible (without incurring fees or fees your other plan would cover for you).


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## brad (May 22, 2009)

OnlyMyOpinion said:


> Sounds like key considerations might be: i) is there a lower mer 'temporary' option (if they are giving you 5% and the mer is 2% you're only picking up 3% and putting your 5% into something you don't want), and ii) are annual transfers possible (without incurring fees or fees your other plan would cover for you).


The MERs are in the 2.5% range for all the funds they offer. The GIC options pay worse than a savings account. And yes, it would mess up my asset allocation, although that's not a big deal. The big question that I want to answer is whether annual transfers are possible without incurring fees. If they are, I'll go for it. If they aren't, it'll be a tough decision. I am fully prepared to walk away from free money, even if it means delaying my retirement by a couple of years. From a financial perspective that's stupid, I know, but my personal values matter too.


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## OnlyMyOpinion (Sep 1, 2013)

Nasty dinosaur fees. Disappointing that cos are still getting themselves (and their employess) roped into these. Remember to check with your own RRSP provider and explain the situation. If you have a decent amount in you account(s) it is common for them to be willing to reimburse you the fees it cost to move your money to them.


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## brad (May 22, 2009)

OnlyMyOpinion said:


> Nasty dinosaur fees. Disappointing that cos are still getting themselves (and their employess) roped into these. Remember to check with your own RRSP provider and explain the situation. If you have a decent amount in you account(s) it is common for them to be willing to reimburse you the fees it cost to move your money to them.


Good advice, thanks! And I will also talk with the people at my company who made this decision to see if they'd be willing to revisit it at some point in the future. The US branch of our company uses Vanguard as a retirement plan vehicle, which is great. That's not an option here, but I'm sure they could have come up with something better than this.


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## GoldStone (Mar 6, 2011)

brad said:


> The big question that I want to answer is whether annual transfers are possible without incurring fees. If they are, I'll go for it. If they aren't, it'll be a tough decision. I am fully prepared to walk away from free money, even if it means delaying my retirement by a couple of years. From a financial perspective that's stupid, I know, but my personal values matter too.


Sorry to say but this sounds juvenile. To join or not to join is a purely economic decision. It has nothing to do with your personal values.

Invest $5,000 at 7% for 20 years. Final balance: $19.3K
Invest $5,000 + $5000 match at 4.5% (7% - 2.5% MER) for 20 years. Final balance: $24K.

Of course, you can do better than that by transferring money out.

If you feel strongly about your values, here's what you should do:

1. Join the plan
2. Educate your co-workers about MERs. Do lunch & learn seminars, etc.
3. Lobby HR to improve the plan. Ask co-workers to join your lobbying effort.


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## brad (May 22, 2009)

GoldStone said:


> Sorry to say but this sounds juvenile.


I'm happy to be seen as juvenile if you think this is purely an economic decision. In my view it's not, call it juvenile or stupid or whatever you like. ;-)


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## Daniel A. (Mar 20, 2011)

Anything that helps motivate saving for retirement is good.

Take advantage of all that is offered.


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## indexxx (Oct 31, 2011)

OnlyMyOpinion said:


> Didn't mean to seem insulting above with 'hammer' comment. It's obvious you are considering all options here. The other consideration is that the contribution you & co would make to this plan will reduce the amount you can cotribute to your own RRSP (assuming you are max'ing out contributions) which messes up your allocations etc.
> Sounds like key considerations might be: i) is there a lower mer 'temporary' option (if they are giving you 5% and the mer is 2% you're only picking up 3% and putting your 5% into something you don't want), and ii) are annual transfers possible (without incurring fees or fees your other plan would cover for you).


Sorry but I think whole concept is not being understood by some.

It is not a 5% return minus 2% MER. 

It is a *100%* return minus 2% MER. 

These plans work by allowing you to invest up to 5% of your salary, and the company will match that with an equal contribution of another 5% of your salary. It's a value perk added as an incentive in order to retain good staff.

So if your salary is $50k, you can put $2,500 into the company plan, and they will put in another $2,500 on your behalf. It is a free doubling of your money (minus the MER) at every pay check, which is impossible not to take advantage of. I know people who refuse to take advantage of it, and it just baffles me. 

Two scenarios. Assume 25 year timeline, 6% return:

A. Starting with an initial $2,500 investment, you personally invest another $2500 per year in an index fund, with a management cost of 0.5%. Your portfolio is worth $145,390.96 after 25 years.

B. Starting with an initial $2,500, your employer matches this for a initial investment of $5,000, and every year thereafter, so now your fund is receiving $5,000 per year. With a management fee of 2.5%, after 25 years your portfolio is worth $290,781.91. However it has still only cost you the same mount per month.

So yes, you have paid almost 9 times the fees over 25 years, but have also more than doubled your return because all of that extra (FREE) contribution from your employer has also been compounding tax-deferred. Here's a link to an MER calculator. http://saviifinancial.com/seg-funds/m-e-r-fee-calculator/

Also, this is not taking raises into account. Don't forget that you would also hopefully get a raise every couple of years, increasing both what your own 5% contribution would be, and the resulting match from your employer. This just happened to me this week, so my raise wasn't just the amount on paper, because I contribute 4% and my company matches it with 6%, it is actually also another 6% of that increase. So say you get a $5,000 raise- in your case at 5% match your company will contribute an additional $250 a year on top of your automatic increased $250 contribution thanks to your raise. You can't lose.


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## OnlyMyOpinion (Sep 1, 2013)

indexxx - you are totally correct. I don't know where my mind was at to be comparing a 5% of salary match with a 3%MER. duh:distress:


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## cainvest (May 1, 2013)

Good one to point out so things aren't misinterpreted which I thought might be the case after reading my previous post again. Bottom line is a company matching (dollar for dollar) gives you a huge headstart on that amount, what would otherwise take 8-12 years of growth in index equites to reach.


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## Moneytoo (Mar 26, 2014)

My husband's company will start employer's matching RRSP group plan next year. They're with Manulife and we don't have the list of mutual funds that will be available yet, but I'm mostly concerned with how this new RRSP account will fit in our rebalancing across accounts (currently two RRSPs and two TFSAs) I will not question your ethical reservations about high MERs, but from a personal experience - we've been investing in mutual funds for almost 20 years (through work group plans and personally), and have done quite well (especially with our daughter's RESP account) I wasn't impressed with TD e-Series funds when they first came out and were advertised everywhere as a cheaper option - mutual funds that I hand-picked performed much better. This spring we decided to try ETFs and individual stocks - and so far have nothing to show for it, but will try to stick to the strategy, hopefully it does work better long-term (we both still have 20 years till retirement)

So here's what I was thinking from a rebalancing perspective (since high MERs are a given):

- my husband can start investing in a balanced fund (and I won't include his work RRSP account in our rebalancing spreadsheet)

or

- depending on what funds will be available in his plan, we can try to strengthen the areas in our portfolio where Mutual Funds have a better chance to outperform index ETFs (for example, bonds and small caps)

And, to give you another example of why you probably shouldn't be so hard on the ethical aspect of high MERs: our daughter's boyfriend just opened RRSP and TFSA accounts this year - and, after much consideration, purchased GICs and Mutual Funds. His main reason? He doesn't have that much of time and money (and is intimidated by self-directed plans) - and wanted to help a friend who just started working as a financial advisor 

He bought a few books about saving and investing, I borrowed and read "The Wealthy Barber Returns", and tried to explain to him again the advantages of passive index investing - but, frankly, I'm not yet convinced myself... and after I read that one of the traits of a successful investor is indifference - I realized that this is what I've been lacking this year


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## brad (May 22, 2009)

Moneytoo said:


> and after I read that one of the traits of a successful investor is indifference - I realized that this is what I've been lacking this year


Haha! I think the key is that indifference is a trait of a successful _long-term_ investor, not investors in general.

Basically my objections to this plan are:

1. It only offers managed funds, and there's a pretty convincing body of evidence to show that most (70-80%) managed funds underperform indices over the long term. 
2. It charges high fees (MERs are at least 2.5% and in some cases higher)
3. There is no reasonable alternative offered for people who want to avoid managed funds and high fees. Their GIC rates are pitiful.

Most of the people responding here argue that you should never turn down free money, and that this is a purely economical question. I understand that argument and that was my initial reaction too. But on the other hand, accepting this free money forces me to help perpetuate the practice of pulling wool over the eyes of uneducated investors and encouraging the use of expensive managed funds for retirement plans. As ethical dilemmas go this one probably doesn't rank high on the scale, but I hate this practice. To me, accepting this money, matching it with my own, and giving it to this firm is not that much different from accepting money to cheat on my spouse. If someone offered you $100 to cheat on your spouse, would you take it? What about $10,000? Or $100,000? If you said yes to the higher figures it just means you're willing to sacrifice your values and ethics for a price. (I think there was a movie made on this premise, with Steve Martin.) 

The most reasonable approach from my bottom-line perspective would be to enrol in the plan and try to make the best of a bad situation by transferring my money out as frequently as I can to my own self-directed RRSP, while working with my employer to try to convince them to change to another investment firm. But it still sticks in my craw and part of me just wants to walk away from it because I am opposed to the business model being used by this RRSP provider and don't want to support it with my (or my employer's) money.


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## humble_pie (Jun 7, 2009)

perhaps this is a turnaround good situation just waiting for a robin hood or a white knight to come along & rescue it, not a bad situation?

brad is a longtime champion of donations here in cmf, so a much higher RRSP resulting from an employer's 5% equal contribution plan is going to mean substantially higher levels of charitable giving later on, is that not so?

in the meantime, brad mentions that the employer's US fund provider is vanguard, while only the canadian subsidiary is offering the traditional high-fee mutual fund family.

so - logically speaking - it should be possible to ask the canadian manager to change, no? presumably they made a business decision based on selecting what appeared to be the best deal that was bid to them by competing fund vendors? i imagine that if otherwise-equal choices that are more ethical are presented to them, they will seriously consider changing?

the challenge here - 1) accept the existing plan, 2) accept the equal $$ employer contribution, 3) transfer assets out as soon as the vesting/waiting period has matured, 4) increase charitable donations as one sees fit, & 5) work with the company to change its fund vendor for all employees, not just oneself - all this looks like a win-win campaign to me.

whereas walking away does not seem to send any message, nor does it have any impact.


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## RBull (Jan 20, 2013)

brad, just my opinion but your analogy isn't even close to being reasonable. Accepting money from a pension share program at your work equivalent to accepting money to cheat on your wife.......???? :hopelessness:

Forget the stubbornness....... take the free money. By not taking it you won't be doing anything to stop the expensive pension fund at your work. No one will care except your employer, and they'll be happy to save that money. 

If your ethics and values are really that important in this case take the money and then work as Goldstone suggested to get the provider and/or fees changed. That would say a lot more about your ethics and values, and also is a whole lot more productive and beneficial.

In direct response to your points.

1. To not accept free money because at this time it has to be invested in managed funds that "may" under perform the market overall is a questionable argument. The free money with "potential" under performing funds is still almost certain to build a larger nest egg . Besides you may be able to transfer money out to your personal account. 
2. Yes the fees are high. Maybe you can get this changed. Even with high fees you will be way ahead financially. This is not a good reason to decline free money, unless your "principles and values" can provide you with a comfortable retirement. 
3. You seem to be willing to accept only the best of the best, with less consideration to the most important part of the situation. That is, you are being given 5% of your salary. Perfect plans aren't always available. Not having a fantastic option for anyone and everyone isn't really a good reason to not accept the free money. Again, even with a "potential" lower rate of return you'll be further ahead financially. And once again you may be able to transfer this out or get something done about it. You'll probably have your own personal savings as well where you can choose your 
indexing.

SUMMARY: Protesting they way you're suggesting only hurts you. 

There have been a lot of good points offered in this thread. Hopefully you will take some more time and think this through rationally.


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## brad (May 22, 2009)

RBull said:


> There have been a lot of good points offered in this thread. Hopefully you will take some more time and think this through rationally.


Yes, you're right -- I think right now I'm angry at being put in this situation, which is affecting my ability to think about it objectively. As I calm down I'll probably be much more rational about it. ;-)


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## Moneytoo (Mar 26, 2014)

brad said:


> As ethical dilemmas go this one probably doesn't rank high on the scale, but I hate this practice. To me, accepting this money, matching it with my own, and giving it to this firm is not that much different from accepting money to cheat on my spouse. If someone offered you $100 to cheat on your spouse, would you take it? What about $10,000? Or $100,000? If you said yes to the higher figures it just means you're willing to sacrifice your values and ethics for a price. (I think there was a movie made on this premise, with Steve Martin.)


Well to me there's no ethical dilemma - I'm accepting higher MERs for convenience and a CHANCE to outperform the market (which is impossible with index ETFs as they ARE the market by definition ) But the movie you're referring to is Indecent Proposal with Robert Redford I believe - and the wife was offered a million dollars for one night (I'm no Demi Moore, so no one would offer me that much - but in their financial situation, I'd take it )

But I do understand your dilemma - and can relate with a much simpler example: I don't like investing in companies that I don't like, no matter how much is the potential upside. So if I were offered a group plan that would only allow me to invest in Rogers for example - I'd be tempted to walk away and invest in Bell and Telus on my own. And won't care if people think it's stupid - not everything's in this life is about money, even investing


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## protomok (Jul 9, 2012)

Definitely check with the employer, I've never heard of an RRSP match that doesn't allow you to at least shift part of the money out of the group plan. The ability to transfer the funds out of the shady group plan should help with the moral objections.

My employer lets you move money out of the group RRSP plan once per year with the catch that you can't move the employer match portion until you leave the company. It's interesting because one of the main advantages of these group plans is that the MER should be lower since the Group RRSP supplier is getting lots of business from the employer. For example the MERs on index funds provided by my employer's group RRSP plan are even lower than eSeries.

Generally the trade off is that you have restrictions on fund selection, frequency of transfers etc. but you get low MERs. In your case it sounds like the company is either not negotiating properly or just has a low number of employees enrolled in the plan...maybe over time the MERs would drop.


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## cainvest (May 1, 2013)

protomok said:


> Definitely check with the employer, I've never heard of an RRSP match that doesn't allow you to at least shift part of the money out of the group plan.


Though some might, I've never heard of an employer fully blocking withdrawals either. However, I have seen numerous plans that get you with a high DSC which can be double the already high MER percentage and last for a number of years. Even with the high DSC you still come out ahead due to the immediate 100% gain so I'd still move it out when possible.


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## derico (Nov 23, 2013)

I don't think your company did a very good job of negotiating with Industrial Alliance. The company I'm with uses them, with access to index funds at very competitive rates for bonds, Canadian index, US index and International index. All have rates that are competitive with the ETF's I own in a discount brokerage account. Hard to say if talking to your company changes anything, I guess it depends on how many employees they bring into the plan as to the rates they can negotiate. 

edit.....
Thinking again, you didn't say if you were looking at the basic Industrial Alliance website or rates specifically set up for your company. I believe the basic rates on the website are for anyone signing up with them off the street, companies that bring in more people to a group plan get better rates. Are you sure the rates you get are the posted rates or have you seen the rates your company has agreed to? 




brad said:


> The MERs are in the 2.5% range for all the funds they offer. The GIC options pay worse than a savings account. And yes, it would mess up my asset allocation, although that's not a big deal. The big question that I want to answer is whether annual transfers are possible without incurring fees. If they are, I'll go for it. If they aren't, it'll be a tough decision. I am fully prepared to walk away from free money, even if it means delaying my retirement by a couple of years. From a financial perspective that's stupid, I know, but my personal values matter too.


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## avrex (Nov 14, 2010)

This thread makes me wonder about the individual(s), within the company, that are responsible for setting up a company's pension plan.
They hook up with a mutual fund company with high 2.5% MER mutual funds, that their employees are *required* to use.

.... Hmmm. Makes you wonder if those individual(s) received some sort of kickback (i.e. bribe) to use a particular mutual fund company's products.

As far as I'm concerned, in these cases, an employee's best interests are *NOT* being looked after.


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## GoldStone (Mar 6, 2011)

derico said:


> Thinking again, you didn't say if you were looking at the basic Industrial Alliance website or rates specifically set up for your company. I believe the basic rates on the website are for anyone signing up with them off the street, companies that bring in more people to a group plan get better rates. Are you sure the rates you get are the posted rates or have you seen the rates your company has agreed to?


This is a very good point. Retail rates posted on the public Industrial Alliance web site do not apply to the group plans.

*OP*: verify the rates in your plan documentation.


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## GoldStone (Mar 6, 2011)

avrex said:


> .... Hmmm. Makes you wonder if those individual(s) received some sort of kickback (i.e. bribe) to use a particular mutual fund company's products.


Never attribute to malice that which is adequately explained by stupidity or ignorance.


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## avrex (Nov 14, 2010)

GoldStone said:


> Never attribute to malice that which is adequately explained by stupidity or ignorance.


LOL. Yes, of course. The Hanlon's razor explanation is more likely.


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## bltman (Aug 12, 2010)

Moneytoo said:


> My husband's company will start employer's matching RRSP group plan next year. They're with Manulife and we don't have the list of mutual funds that will be available yet...


The company I work for has been with Manulife for awhile and the MERs for the funds are all reasonable. When I first joined, most of the actively managed funds were in the 1.15%-1.35% range. Not something I would normally invest in but not bad. However, a re jig of the available funds under the plan a few years ago resulted in a switch to mostly index funds or lower cost managed funds (e.g. Mawer balanced fund) or target date funds run by Blackrock. 

Between the dollar cost averaging, acceptable MERs, and the 2x yearly auto rebalancing, I have made this my primary RSP account. As a result I keep my other RSP investments separate (with the effect that it also keeps things very simply).


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## indexxx (Oct 31, 2011)

avrex said:


> This thread makes me wonder about the individual(s), within the company, that are responsible for setting up a company's pension plan.
> They hook up with a mutual fund company with high 2.5% MER mutual funds, that their employees are *required* to use.
> 
> .... Hmmm. Makes you wonder if those individual(s) received some sort of kickback (i.e. bribe) to use a particular mutual fund company's products.
> ...


The thing to remember with these plans is that it's often an insurance company that the employer has contracted for their entire benefit package- so what you get are segregated funds or other offerings that this insurer carries, and there is little to no real chance of bargaining down the MERs- why would the insurance company cut their own commissions? And those in the employer's administration would likely have little to no financial knowledge (as we all know, the average person is woefully uninformed), and there would be no way that they would be taking 'kickbacks'- imagine the uproar and charges laid when that bit of info got loose- as it eventually would when some disgruntled manager or something blew the whistle. 

The way I look at mine is that it's free money, an extra salary bump. I simply chose what I felt were the best available funds, and I just let it run. As it's a free, nearly 150% automatic gain (in my case, at the matching rate I have), and only a bit off the top of my check that I never miss, I'm not that concerned over the minutiae of this part of my portfolio because I actively work my other investments; if you set it up and then move some out later, great. But either way I really think that in the future, you'll regret not taking this opportunity. 

IMHO, stressing over the 'rightness' or fairness of the MER is tilting at windmills, because it is what it is.


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## brad (May 22, 2009)

GoldStone said:


> This is a very good point. Retail rates posted on the public Industrial Alliance web site do not apply to the group plans.
> 
> *OP*: verify the rates in your plan documentation.


Yes, thanks, this is indeed a good point. It was actually really hard to find the MERs on their site; they have them well hidden and I had to find them using Google searches, but it is indeed likely that the group rates are much lower. I'll be able to get details next week.


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## My Own Advisor (Sep 24, 2012)

brad said:


> I'll be able to get details next week.


Great stuff Brad and again, like I mentioned upstream, you can let some CMFers provide some feedback.

Can't say enough to take the free money from work! Then, you can pick the best products from the litter.


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## Xoron (Jun 22, 2010)

GoldStone said:


> 1. Never ever leave free money on the table. 5% match beats high MERs.
> 
> 2. Check out GIC options in the plan. They may be quite decent. If so, invest the entire work plan in GICs. Invest in equities elsewhere. Treat all your plans as a single portfolio with one asset allocation.


This is what I have done. My company's plan is with Great West Life and the options are terrible. I mean the 1 year GIC rate it the lowest available on the market. But the $ for $ match is hard to beat (up to the yearly limit)

Unfortunately, the transfer out option isn't available, so I'm stuck. It'll take quite a few years for the high priced MFs to outweigh the company matching so I'll be investing every year for a while.


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## Xoron (Jun 22, 2010)

protomok said:


> Definitely check with the employer, I've never heard of an RRSP match that doesn't allow you to at least shift part of the money out of the group plan. The ability to transfer the funds out of the shady group plan should help with the moral objections.


My employer handcuffs us:

There are two catagories of money in my Employer account, funds I've contributed and funds they've contributed. Basically, if I remove any of MY invested money, I can't get next year's employer match unless I put back what I've removed, and added this years contribution. And I'll only get matched on the new amount, not the replaced amount. And I can't remove ANY of the employer's match unless I leave the company. At that point I can transfer all $ into a personal RRSP account or leave it with GWL.


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## RBull (Jan 20, 2013)

brad said:


> Yes, thanks, this is indeed a good point. It was actually really hard to find the MERs on their site; they have them well hidden and I had to find them using Google searches, but it is indeed likely that the group rates are much lower. I'll be able to get details next week.


Yes, that was a very good point derico brought up. Normally group rates are more competitive than retail counterparts. 

Good luck with the investigation and let us know what you come up with.


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## Xoron (Jun 22, 2010)

RBull said:


> Yes, that was a very good point derico brought up. Normally group rates are more competitive than retail counterparts.


Only when the group plans reach a certain size. Our plan is quite small, so our rates are in the 1.5%-2.8% range on the MERs


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## brad (May 22, 2009)

Xoron said:


> Only when the group plans reach a certain size. Our plan is quite small, so our rates are in the 1.5%-2.8% range on the MERs


Yes, I'm a little worried about that. We are a big company globally, but small in Canada (fewer than 100 employees).


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## RBull (Jan 20, 2013)

Xoron said:


> Only when the group plans reach a certain size. Our plan is quite small, so our rates are in the 1.5%-2.8% range on the MERs



Fair point. My experience has been with larger public traded companies.


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## gardner (Feb 13, 2014)

My company has the same arrangement -- with MFC -- and the negotiated rates are lower than those generally visible in MFC's public information. They are still not that great, but I contribute religiously since my employer does likewise and free money is free money. In our setup it *is* possible to move the employee contributions to ones SDRSP in cash (but not in kind) and I there are folks here who do that once a year. I personally haven't bothered. The lock-in for us is only as long as we work here, so once I'm retired it can go where I want it to go.


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## indexxx (Oct 31, 2011)

Xoron, I think we are likely in the same boat. My provider is GWL as well, so I'm sure I have the same restrictions. I was going to check into it again when we reconvene after Xmas. If I wanted to change anything, I would have to successfully lobby the HR and Finance dept to switch providers, which I can already say that, due to the nature and size of our organization would be a ridiculously daunting and close to impossible task to say the least.


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## CPA Candidate (Dec 15, 2013)

The carnage the ETF couch potato, passive indexer crowd has inflicted on impressionable minds is highlighted in this thread. Yikes.


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## indexxx (Oct 31, 2011)

Just on the off-chance that was a jibe, passives are a smallish part of my portfolio- I hold mainly tech stocks. I do believe in indexing for a lot of people (for the reasons outlined in Chilton's T.W.B.R.) and as a reasonable part of my approach, but also trade fairly actively- part of my personal diversification. I've got eSeries on a bi-weekly deposit plan, my RRSP matching at work, and then everything else is equities and the odd REIT and ETF. If 'yikes' means 100% portfolio growth in three years, call me 'Mr. Yikes'.


EDIT- hmmm... time for a user name change?


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## Xoron (Jun 22, 2010)

indexxx said:


> Xoron, I think we are likely in the same boat. My provider is GWL as well, so I'm sure I have the same restrictions. I was going to check into it again when we reconvene after Xmas. If I wanted to change anything, I would have to successfully lobby the HR and Finance dept to switch providers, which I can already say that, due to the nature and size of our organization would be a ridiculously daunting and close to impossible task to say the least.


I tried already, but no dice. Talked with management, and they aren't all that interested in changing the plan. 

And I called GWL / the fund provider directly. Basically was told exactly what I mentioned up thread. We're too small to get lower rates. As we scale up, we'll get better rates. But working for a small company, I don't see the rates getting better anytime soon.

What sort of annoys me is that the cost to add our company to the overall GWL investment portfolio must be trivial. So why can't we use the scale of all the other invested companies to get lower MERs? I know one other member mentioned that his wife was with GWL, and their MERs were quite reasonable. So lower rates through GWL does exist.


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## Moneytoo (Mar 26, 2014)

bltman said:


> The company I work for has been with Manulife for awhile and the MERs for the funds are all reasonable. When I first joined, most of the actively managed funds were in the 1.15%-1.35% range. Not something I would normally invest in but not bad. However, a re jig of the available funds under the plan a few years ago resulted in a switch to mostly index funds or lower cost managed funds (e.g. Mawer balanced fund) or target date funds run by Blackrock.
> 
> Between the dollar cost averaging, acceptable MERs, and the 2x yearly auto rebalancing, I have made this my primary RSP account. As a result I keep my other RSP investments separate (with the effect that it also keeps things very simply).


I've been looking at Mutual Funds on Manulife website, and looks like they have different MERs for the same funds depending on the series:

Advisor Series
Series F
Series FT
Series I
Series IT
Series T

So far most of the funds that I like have been capped, but something like this might work for my husband (who loves dividends and wants to be overweight in US ): 

Manulife Strategic Balanced Yield Fund

_This Fund offers exposure to a diversified portfolio primarily of dividend paying U.S. equity securities and global multi-sector fixed income. Experienced equity portfolio managers utilize a detailed seven step process to identify undervalued companies to hold over the long term and the team will tactically manage currency exposure._

*Asset allocation (%)*
„ 53.9 United States Equity
„ 24.1 United States Fixed Income
„ 9.3 Foreign Fixed Income
„ 6.6 Foreign Equity
„ 2.0 Cash
„ 1.6 Canadian Fixed Income
„ 0.8 Canadian Equity
„ 1.7 Other


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## Xoron (Jun 22, 2010)

CPA Candidate said:


> The carnage the ETF couch potato, passive indexer crowd has inflicted on impressionable minds is highlighted in this thread. Yikes.


Not like we have a choice through our company plans. MF / GIC or nothing.

Outside, I have quite a few individual stocks. And plan to continue holding them / Trading them for the foreseeable future.


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## Moneytoo (Mar 26, 2014)

CPA Candidate said:


> The carnage the ETF couch potato, passive indexer crowd has inflicted on impressionable minds is highlighted in this thread. Yikes.


The case for active management lives on


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## GoldStone (Mar 6, 2011)

CPA Candidate said:


> The carnage the ETF couch potato, passive indexer crowd has inflicted on impressionable minds is highlighted in this thread. Yikes.


The OP is a bit impressionable, yes. He turned a simple economic calculation into a false moral dilemma.

That's not the fault of "the ETF couch potato, passive indexer crowd". The message that Costs Matter can't be repeated frequently enough.

The OP may be guilty of hubris. But so are you, CPA Candidate. You know who inflicts the real carnage in this situation? The company that charges 2.5% MERs in a captive plan. That is the real YIKES.


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## indexxx (Oct 31, 2011)

GoldStone said:


> The OP is a bit impressionable, yes. He turned a simple economic calculation into a false moral dilemma.
> 
> That's not the fault of "the ETF couch potato, passive indexer crowd". The message that Costs Matter can't be repeated frequently enough.
> 
> The OP may be guilty of hubris. But so are you, CPA Candidate. You know who inflicts the real carnage in this situation? The company that charges 2.5% MERs in a captive plan. That is the real YIKES.


+1 ^ great post Goldstone!


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## indexxx (Oct 31, 2011)

Xoron said:


> I tried already, but no dice. Talked with management, and they aren't all that interested in changing the plan.
> 
> And I called GWL / the fund provider directly. Basically was told exactly what I mentioned up thread. We're too small to get lower rates. As we scale up, we'll get better rates. But working for a small company, I don't see the rates getting better anytime soon.
> 
> What sort of annoys me is that the cost to add our company to the overall GWL investment portfolio must be trivial. So why can't we use the scale of all the other invested companies to get lower MERs? I know one other member mentioned that his wife was with GWL, and their MERs were quite reasonable. So lower rates through GWL does exist.


Again, why would GWL cut their commissions? They know that companies need this product, and they provide a pile of plans to a lot of organizations. Allowing a 'bulk buy-in' for lower rates defeats their own purpose.


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## GoldStone (Mar 6, 2011)

Moneytoo said:


> The case for active management lives on


The case lives on, says the guy who sells stock screening subscriptions. No big surprise there. Ask a barber if you need a haircut.


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## Moneytoo (Mar 26, 2014)

GoldStone said:


> The case lives on, says the guy who sells stock screening subscriptions. No big surprise there. Ask a barber if you need a haircut.


I have nothing to do at work, 5 more free articles on The Globe & Mail, no cash till early January - and can't believe that CPG dipped to $22 while I was on vacation and away! Was gonna add to my 100 shares (that I purchased - shame on me! - for $43.10!)

Yeah, maybe I should ask my barber if he's the wealthy one... lol


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## Xoron (Jun 22, 2010)

indexxx said:


> Again, why would GWL cut their commissions? They know that companies need this product, and they provide a pile of plans to a lot of organizations. Allowing a 'bulk buy-in' for lower rates defeats their own purpose.


To show there really is a Santa Clause and Christmas Miracles too


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## protomok (Jul 9, 2012)

Xoron said:


> My employer handcuffs us:
> 
> There are two catagories of money in my Employer account, funds I've contributed and funds they've contributed. Basically, if I remove any of MY invested money, I can't get next year's employer match unless I put back what I've removed, and added this years contribution. And I'll only get matched on the new amount, not the replaced amount. And I can't remove ANY of the employer's match unless I leave the company. At that point I can transfer all $ into a personal RRSP account or leave it with GWL.


Shoot, that sucks 

I wonder if you could use Home Buyers Plan or Lifelong Learning Plan to withdrawal from the RRSP, then when you repay the money to your RRSP simply pay it to an RRSP account of your choosing.

I'm not 100% sure on this but I don't think a company is allowed to refuse an RRSP withdrawal for HBP or LLP. I checked with my employer's RRSP plan and even though they don't allow employees to transfer out money that is matched by the employer they make an exception for HBP or LLP.

Another possibility could be asking if your plan allows you to contribute to a spousal RRSP (with GWL) then see if your spouse can move the money to another RRSP. And in order to not make assumptions here if a spouse is not available I'm sure someone on CMF who hates high MERs enough would be willing to assist with such a manoeuvre


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## Xoron (Jun 22, 2010)

protomok said:


> I wonder if you could use Home Buyers Plan or Lifelong Learning Plan to withdrawal from the RRSP, then when you repay the money to your RRSP simply pay it to an RRSP account of your choosing.


Already own my home, so that one is off the table. No plans on going back to school, so the LLLP won't be of any help.



protomok said:


> Another possibility could be asking if your plan allows you to contribute to a spousal RRSP (with GWL) then see if your spouse can move the money to another RRSP. And in order to not make assumptions here if a spouse is not available I'm sure someone on CMF who hates high MERs enough would be willing to assist with such a manoeuvre


I'm pretty sure that wouldn't matter. The funds would still be split between my funds and the company's funds. Just that it would in a spousal RRSP account.

Don't feel bad for me, lots of people don't have any RRSP matching. And I'd much rather be doing this than participating in the Ontario Pension Plan proposed by the Liberals (Not trying to go off track here). At least when I die, my family will get my (taxed to death) RRSP, unlike the OPPP plan.


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