4 myths about the RRSP+ with the Fonds de solidarité FTQ

There are many widely held yet untrue beliefs about the RRSP+ with the Fonds. Let's debunk the most popular myths about this labour-sponsored fund.

Is the RRSP+ with the Fonds a smart option? Like all financial products, it depends on your savings goal, your investment horizon, and your financial situation. One thing is certain, however: it gives you 30% in tax savings,1 in addition to the usual RRSP deductions. Let’s see how the RRSP+ with the Fonds can meet your needs by debunking four myths.

1 “The RRSP+ is good leading up to retirement, starting at age 55. But it’s not useful before then.”

All good myths generally persist because they contain a grain of truth. It’s true that the return-enhancing effect of the tax credits you receive when you contribute to the RRSP+ will be amortized over the years that you hold your savings. But is that a good enough reason not to make use of it when retirement is still a long way off?

For many savers, getting an additional 30% in tax savings1 allows them to save at a lower cost or to enhance their savings strategy by depositing the equivalent of their tax credits in a TFSA, for instance. When a $5,000 contribution costs you only $1,645,2 the RRSP+ becomes a pretty useful savings tool!

Many experts and journalists agree that labour-sponsored funds are still excellent investment options for Québecers. Here are some relevant newspaper articles on the subject (available in French only):

2 “I’ve heard that the returns on labour-sponsored funds aren’t great.”

We encourage you to verify this statement by comparing the Fonds’ returns with those of popular savings products you may have at other financial institutions. Due to the unique nature of the Fonds, it’s hard to find identical products. However, in many cases, you can see that the returns are equivalent. Don’t forget to add the additional 30% in tax savings to the Fonds’ reported returns!

Returns for the Fonds de solidarité FTQ (as of November 30, 2021)
1-year return 13.6%
3-year return 10.3%
5-year return 9.1%
10-year return 7.9%

3 “My Fonds savings are managed by the FTQ.”

It’s true that, when it was established, there was a direct link between the FTQ central labour union and the Fonds de solidarité FTQ. The creation of the Fonds is an important aspect of Québec’s history, which you can read about on our Wikipedia pageAttention, this link will open a new tab..

Today, the Fonds has its own governance and investment policy. All Québecers who are eligible to contribute to an RRSP can entrust their money to the Fonds for their retirement savings; they don’t need to be an FTQ union member or unionized at all. At the Fonds, we firmly believe that investing in the local economy is everyone’s business!

4 “I can’t withdraw my money before retirement.”

When you contribute to the RRSP+, you enable the Fonds to invest in Québec companies through patient capital. As such, in exchange for the additional 30% in tax savings,1 you agree to withdraw your savings only under certain conditions. The most frequent criterion is retirement, which can occur as early as age 45. However, there are many other criteria. For illustrative purposes, here’s a breakdown of the number of redemptions by criterion for the fiscal year that ended on May 31, 2021.

Criterion Number of requests Value
Age 65, retirement, or early retirement 33,940 $568M
Buying a first home 5,461 $62M
Death, disability, or 60-day redemption 1,908 $37M
Exceptional circumstances (job loss, etc.) 2,230 $12M
Going back to school 301 $2M
Other criteria (capital injection in a business, emigration, redemption of pension credits, ineligibility for tax credits) 152 $3M
Total 43,992 $684M

As you can see, the RRSP+ with the Fonds can be part of your savings strategy so that you can take advantage of additional tax savings while still investing your savings for when you really need them. In addition, by choosing the RRSP+ with the Fonds, you’re investing in local businesses. That’s good for you and for Québec!

Legal notes

1 Fonds de solidarité FTQ shareholders receive 15% in tax credits from the Québec government and 15% from the federal government. They are capped at $1,500 per fiscal year, which represents a $5,000 purchase of shares of the Fonds de solidarité FTQ.
2 Example based on the 2022 tax year, for a person with an annual taxable income of $60,000, at a marginal tax rate of 37.1%. The amounts calculated are estimates and may vary depending on your tax situation.

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