Government-Sponsored Retirement Arrangement (GSRA)
Candlefocus EditorGSRAs are set up by various government departments and employers who use public funds to pay their employees or contractors. GSRAs typically mandate a certain percentage of the employee’s or contractor’s income to be placed into an account as a pre-tax contribution, which is then invested into a wide range of products to build up capital over time. GSRAs typically also offer the option of lump-sum payments made on a regular basis, either as part of the regular salary package or as an extra incentive.
The Canadian government has put certain regulations in place to ensure that GSRAs offer appropriate to the individuals who hold them. Firstly, the amount that GSRAs can contribute to their private retirement plans are limited in comparison to the contributions allowed to RRSPs and TFSAs. This is meant to ensure that GSRAs are not used to abuse the tax system by transferring more money away from government-sponsored programs than is necessary.
Furthermore, the Canadian government has stipulated that GSRAs must have an adequate measure of risk management in place. GSRAs must have safe investment options and a built-in risk-measurement process that allows individuals to choose the best return on their investment. The investments held within GSRAs are typically managed by professional money managers who have experience in the area and offer a wide range of financial products that are tailored to the individual’s retirement goals.
A Government-Sponsored Retirement Arrangement can be an invaluable tool for individuals who wish to ensure that they have a reliable income stream on retirement. They come with a certain measure of risk and the contributions are non-tax-deductible, but GSRAs are a great way for individuals to start building up their retirement nest-egg while minimizing their tax liability. With the right advice and prudent investments, GSRAs can be a great way to help individuals save for their retirement goals.