Closing the Growing Retirement Savings Gap in Canada

There is a growing retirement savings crisis in Canada and we have a once-in-a-generation opportunity to address it. Too few Canadians feel prepared for retirement and most have not set aside or saved anything for retirement.

As businesses look to transition and transform in 2022, this is our opportunity to rethink Canada’s retirement ecosystem and provide more Canadians with the workplace retirement programs they deserve and desperately want.

This is our opportunity to build back better for generations to come.

The truth is, starting to save for retirement can be difficult, and without automatic contributions it can be hard to stay on track, especially when life throws curveballs. Returns on popular vehicles such as RRSPs depend on market performance, which is not an area of expertise for average Canadians, and acquiring informed, unbiased investment advice to maximize returns over a lifetime can be challenging.?

With a third of Canadians living paycheque to paycheque, saving for the future is a steep climb and yet more urgent than ever.

According to a report commissioned by the Canadian Public Pension Leadership Council (CPPLC), those without any workplace pensions have a median savings of just over $3,000. The Canada Pension Plan and Old Age Security benefits are designed to only cover basic living expenses, but they are not sufficient to support the quality of life that retirees want. With rising costs, poverty is a reality for too many financially vulnerable seniors.

The key to unlocking a brighter retirement future in Canada lies in accessible and affordable retirement plans.

Defined Benefit (DB) pension plans that provide inflation-indexed lifetime retirement income are the most efficient way to help close the retirement income gap. High-quality DB pensions – once the envy of public sector employees – are now available to private sector workers at affordable contribution rates. ?

Expanding Access to Affordable Pensions

Canadians know that DB pensions are a valuable and low-stress way to prepare for retirement. For the same contribution rates, the value of a good DB pension plan can yield triple the retirement income when compared to individual RRSPs.

Yet because of lack of awareness and antiquated views about the associated costs of traditional single employer DB plans, many workers are left with pension envy when Modern DB coverage is within reach at the same costs as current RRSP programs.

Thanks to design innovations and support by policymakers, non-profit plan providers like CAAT Pension Plan have emerged with sustainable, low-cost Modern DB pension plans to expand coverage across all industries in the public, private and non-profit sectors. CAAT empowers members and employers to tailor their contribution rates based on their retirement goals. This gives members much more control over their financial future and retirement income, which can have positive economic impacts for all Canadians.

Across Canada, pensioners with purchasing power contribute to local communities, small businesses, and the national economy.

A recent study commissioned by CPPLC on the economic impacts of public sector pension plans (the vast majority of which are DB plans) found that $16.72 of economic activity is generated for every $10 of pension paid to a retired member. In total, Canada’s GDP benefited by $82 billion in 2019, and 72% of the businesses supported by public sector DB pension spending employ less than 10 people.

The good news is that CAAT is not alone in expanding coverage. OPTrust Select is available to Ontario’s not-for-profit sector, an area of the economy that typically doesn’t have access to cost-effective DB workplace pensions.

Now is the time to get Canada back on track and restore the peace of mind that lifetime retirement income security provides. Expanding access to affordable pensions and closing the retirement gap is not just the smart thing to do to. It’s the right thing to do for Canadians, for the economy and for generations to come.??