With pensions declining, Canadians must plan their own retirement

A new report says less than half of non-retirees in Canada have a workplace pension plan. IG Wealth Management’s annual retirement study said a generational shift is re-shaping how Canadians approach retirement as 48% of non-retirees have a workplace pension plan, whether it be a defined-benefit or defined-contribution plan.  

“The decline of defined benefit and contribution pension plans has fundamentally shifted the burden of retirement planning on to individuals in recent years,” Christine Van Cauwenberghe, head of financial planning at IG Wealth Management, said in a news release. 

As pensions disappear, many Canadians lack a retirement plan

Employers began phasing out defined benefit pension plans about 30 years ago, the release said, leaving more Canadians without the same level of guaranteed income than previous generations.  

“Our data shows that while Canadians recognize this shift, many still lack a clear picture of what they need to save–and how to convert their savings into a ‘personal pension plan,’” Van Cauwenberghe said. 

The survey found only 11% of non-retired Canadians say they know how much annual income they will need in retirement, while roughly half say they simply do not know at all. Only one-third said they have a retirement plan and savings.

Meanwhile, the survey said about a quarter of employer pension holders didn’t know the details of their plan, including whether it is a defined benefit or defined contribution plan. 

Canadians remain unprepared for longevity and market risks

The survey also highlighted knowledge gaps among Canadians despite having to increasingly rely on their own personal savings. Only four in 10 respondents indicated an understanding of old age security, a registered retirement income fund, or the tax implications of retirement income. 

Other findings included that few Canadians have accounted for longevity risks to their retirement plan, including inflation, health-care costs and market downturns. About 67% of respondents have not stress tested their plan for any potential major economic or financial risks. 

The online survey of 1,350 Canadian adults was done by Pollara Strategic Insights, on behalf of IG Wealth Management, between Jan. 9 and 14. The polling industry’s professional body, the Canadian Research Insights Council, said online surveys cannot be assigned a margin of error because they do not randomly sample the population.

Tax-free savings are outpacing RRSP contributions

In recent years, data shows Canadians have favoured financial vehicles geared more toward tax-free savings than retirement. 

In April last year, Statistics Canada released figures on the utilization of tax-sheltered savings accounts by Canadians in 2023, based on income tax filing data. 

The agency found that 11.3 million tax filers made a contribution to either a registered retirement savings plan or a tax-free savings account. Of that group, 3.8 million contributed only to their RRSP, while five million contributed only to their TFSA. About 2.5 million contributed to both their TFSA and RRSP. 

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