Fiscal yin and yang: Having a pension can boost other investment returns, says StatsCan



Link’s Group TFSA is a great complement to our Alberta Link Pension Plan or Group RRSP

Build that nest, and you may end up with more eggs.

That seems to be the simplest way to describe some recent research from Statistics Canada—which indicates that having a pension can boost return on other investments, such as Tax Free Savings Accounts (TFSAs).

StatsCan examined the relationship between pension coverage and TFSA investment performance for about 350,000 Canadian taxpayers between 2009 and 2013—and found that pension coverage has a “positive but modest effect” on TFSA performance.

Why? It could be that having a pension gets employees thinking about saving earlier in life. Or it could be that a stable core retirement savings vehicle like a pension allows workers to take bigger risks—and reap higher returns—in private investments like TFSAs.

“Programs aimed at directly improving saving outcomes—for example, by simplifying the process of making complex financial decisions—are desirable,” reads the StatsCan report.

“Taken together, the findings suggest that the gradual decline in (pension) coverage in some industries over the past several decades could have led to a corresponding decline in non-workplace risk-taking or investment performance and, as a result, may have even contributed to the aggregate decline in private saving rates.”


A blended plan design

Link is a growing innovator in the workplace financial wellness space. Link’s solutions, including our own Alberta Link Pension Plan (ALPP), clear away many of the barriers faced by employers in providing a pension for their employees—no administrative or regulatory burden, a lower and fully transparent fee structure.

At the same time, Link’s plans and automated management platform, powered by our proprietary algorithm, create prescriptive retirement portfolios tailored to an employee’s risk tolerance and retirement objectives.

At Link, we also recommend a blended plan design consisting of our defined contribution ALPP or Group RRSP alongside our Group TFSA—a yin-and-yang, so to speak, that StatsCan suggests can create a better retirement outcome.


A winning combination

Link’s ALPP and Group RRSP plans take the long view. They’re essentially targeted at retirement, using pre-tax dollars, with a long-term timeline that creates more safe and secure money down the road.

Through our ALPP, employees receive the full employer contribution without taxes or source deductions. Meanwhile, Link’s Group RRSP offering has some of the lowest fees in the industry, in addition to the option for a Spousal RRSP for potential future tax savings via income-splitting.

Conversely, our Group TFSA plan offers easy access to your money for occasional withdrawals and subsequent topping up. As with other TFSAs, these involve after-tax dollars, with all investment gains and withdrawals tax-free.


Maximize your investment returns with a two-pronged approach

Ultimately, Link’s Group TFSA is an excellent complement to a company pension plan like the ALPP or a Group RRSP. Contributing to a TFSA does not affect an employee’s RRSP contribution room—and sets up an excellent combination of long and short term, of retirement money and near-term purchases.

This two-pronged approach not only creates a culture of caring at the office. As StatsCan notes, it can take your employees a long way toward building a financially secured future.
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