Ending pension discrimination against your organization’s MVPs

Using retirement compensation arrangements to top up pension savings
By Peter Merrick
|Canadian HR Reporter|Last Updated: 05/28/2002

Over the past two decades companies operating in Canada have found it more and more difficult to provide worthwhile retirement plans to top people. For HR practitioners looking for a competitive edge in attracting and retaining executives and key staff, retirement compensation arrangements (RCAs) that create healthier compensation deals may offer that an edge.

RRSP limitations

In 1957 when the government introduced the RRSP, the premise was that an annual contribution of a business owner or executive of 18 per cent of their total income would provide an adequate pension. But with the limits placed on RRSP contributions, those earning more then $75,000 experience pension discrimination. These people’s retirement plans will generate a much lower retirement income than the accepted 70 per cent of pre-retirement income, which is the rule of thumb.