All Registered Retirement Savings Plans Are Not Created Equal
2011 is quickly coming to an end and many may be wondering what to do in order to benefit from their usual tax break next year given Government’s removal of the mutual fund tax allowance.
According to a number of financial experts investing in a Registered Retirement Savings Plan (RRSP) is the answer many individuals are looking for. If done by 31st December 2011 investors under 65 years of age would be able to avail themselves of similar tax benefits they have been enjoying for the last few years.
A government registered “umbrella” account designed to hold mutual fund investments now and provide regular income after retirement, an RRSP, in addition to reducing the daunting nature of planning for one’s later years, provides considerable tax savings today with investors benefitting from a tax allowance on investments of up to Bds$10,000 annually, as was the case with the mutual fund instruments.
Deciding to invest in an RRSP is only the first step however, what is more important is deciding which plan and which company is right for you to invest in. How does one determine where to go? What questions should one ask and what features should one look for?
In an effort to assist with this process, Fortress Fund Managers Limited (Fortress), Barbados’ leading manager of mutual funds, has created a list of questions all persons should ask when shopping around for a reliable, well managed RRSP.
How much choice do I get when it comes to choosing the type of investments? Is there a menu of options from which I can select the one which best suits my timeline and risk tolerance? What are the fees? Am I getting all of my return? These are just some of the questions which should be asked by a prospective investor.
Roger Cave, Investment Director with Fortress said these questions are very important given that although all RRSPs earn the same tax deduction, they are not all created equal, nor are the investments within them.
“Some providers charge varying levels of commissions and annual administration fees. Others don’t. It’s important to know what the fees are ahead of time and to keep them as low as possible so you can keep more of the investment return. Investors should also ask the following. How good are the underlying investments? Do they have a good long term track record? Short term performance is not always a good indicator to use. If a high fixed rate is being offered, how secure is the institution offering it? Finally, as with any investment, service matters. What level of service and responsiveness can you expect from the institution you are dealing with?”
Fortress operates a low cost RRSP product with flexible investment options allowing the owner to choose how best his/her contributions are to be invested. Options available include combinations of the Fortress Caribbean Growth Fund (Equities) and Fortress Caribbean High Interest Fund (Bonds) both well managed funds with a history of positive performance, generating annual compound returns of 10.7% and 5.7% since inception in 1996 and 2002 respectively, according to September 30, 2011 figures.