Higher Returns, Tax Savings, Flexibility: The Benefits Of An RRSP
Investing in a Registered Retirement Savings Plan (RRSP) is a practice many Barbadians are now becoming more familiar with as it relates to putting measures in place to ensure their financial security in their later years. However, much still remains unclear about what exactly is a RRSP, in addition to the benefits it provides.
These topics were raised recently at the second annual Investment Forum hosted by Fortress Fund Managers Limited, Barbados’ leading manager of mutual funds, where officials of the 15 year old firm sought to explain the mechanics of a RRSP, along with the benefits of investing in such an instrument relative to others.
Rene Delmas, Pension Director at Fortress Fund Managers Limited, described a RRSP as a government registered “umbrella” account designed to hold mutual fund investments now and provide regular income after retirement.
He made the point that the added benefit of investing in a RRSP as opposed to simply investing in individual mutual funds or other instruments is the tax allowance afforded by the Government of Barbados, which, since Government’s removal of the mutual fund tax allowance is the only away such investment related tax benefits can now be accessed.
Delmas also pointed to the view held by many Barbadians who believe that investing in an instrument such as a life insurance policy is sufficient to see them through retirement:
“The reality is these policies help in premature death, however the accumulated savings attached to some of these policies are insufficient to last for the duration of one’s retirement. Returns earned in a RRSP are typically higher than those provided by insurance policies and savings accounts, while RRSP account holders can also be assured that the money they’ve invested over a period of time will revert to a stated beneficiary or their estate if they were to die before reaching the stage of retirement. Additionally, individuals can attach certain levels of guarantee to the annuity they select upon reaching retirement to ensure that in the event of premature death during retirement, pension disbursement is not discontinued, but is again passed on to a stated beneficiary.”
Well versed in the area of pension management, Delmas described the Fortress RRSP as an innovative, low cost RRSP with flexible investment options allowing the owner to choose how best his/her contributions are to be invested.
He noted that the 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.