HomeRegistered Pension plan is a form of a trust that provides pension benefits for an employee of a company upon retirement. RPPs are registered with the government. The employee and employer, or just the employer make contributions to this retirement plan until the employee leaves the company or retires. Contributions to an RPP are tax deductible for both the employee and the employer. Contributions to the plan and gains on underlying assets are tax deferred, so the funds are taxed when they are withdrawn from the plan. In this article, we will discuss assets and liabilities of registered pension plan
Every three years, registered pension plan requires to have actuarial evaluation by independent actuary company, because it is important to test the plan solvency and to adjust the contribution levels required to meet future liabilities. On the other word, this is the test to check future liabilities ans assets to meet future requirement to fund the retirement for companies' employees.
1. Assets
Assets calculated by independent actuary company will provide an assumed value of future income using the same rate of interest assumption used on the fund payouts. This will give us a much more accurate assumption than if we were to calculate them using book value or market value.
2. Liabilities
The actuary will make rather conservative estimates in preparing present value assumptions for future payments, using the assumptions below:
a) Conservative rates of funding earnings, including interest, capital gains and dividends.
b) Raising employees salaries, the relationship between salary increases and the assumed rate of return of pension funds is a key calculation.
c) Estimates about the future of government pension levels of benefit and attempt to integrate those into the plan.
d) Rate of employee terminations.
e) Future mortality of participant and pensioners to fund the death benefit.
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