Network - Winter 2010 - (Page 19)
By Christina Catenacci, LL.B.
Private Savings Plan Contributions Decreasing
ecently, a Statistics Canada report revealed that contributions into private retirement savings plans decreased over the last decade. The share of workers participating in an Employer-Sponsored Pension Plan (EPP) remained fairly constant, while the share of employed tax filers contributing to a Registered Retirement Savings Plan (RRSP) decreased most dramatically. So what can employers do to help their employees prepare for retirement? The median age in Canada increased from 35.2 years old in 1996 to 39.3 years old in 2008. An aging population means that more of the population is approaching retirement. Therefore, it is important to know whether Canadians are getting financially prepared for this reality. Other than the Old Age Security, Guaranteed Income supplement programs, and the Canada and Québec Pension Plans, we are left with private retirement savings plans as the method of saving for retirement. The most common private retirement savings plans are RRSPs and EPPs. The latter refers to both Registered Pension Plans (RPPs) and Deferred Profit Sharing Plans (DPSPs). The tax system provides incentives for Canadians to save for retirement. But how many Canadians are taking advantage of this situation? Statistics Canada conducted a study to find out the answer. It was found that the share of employed tax filers who participated in a private retirement savings plan declined from 54 per cent in 1997 to 50 per cent in 2008. Taking a closer look, the share of workers participating in an EPP remained fairly constant (32 per cent) while the share of employed tax filers contributing to an RRSP decreased from 41 per cent in 1997 to 34 per cent in 2008; this was the most significant aspect of the decline that took place between 1997 and 2008. The decline in contributing to RRSPs applied to both men and women from 1997 to 2008. However, the decrease affected men more than women; the rate of participation for men went from being much higher (56 per cent versus 52 per cent for women in 1997) to only slightly higher (51 per cent versus 50 per cent for women in 2008) over the period. Thus, the gap in contribution rates between men and women has reduced significantly. Over the same period, the number of participants in private retirement savings plans actually increased by 19 per cent for women, but only 4 per cent for men.
NETWORK O Winter 2010
This phenomenon also occurred with the EPPs. The share of women participating in an EPP increased from 32 per cent in 1997 to 34 per cent in 2008, while the share of men declined from 33 per cent to 31 per cent. In fact, a larger share of women participated in an EPP in 2003, 2006 and 2008 compared to men. Interestingly, this type of finding could also be seen with RPPs. The number of female members increased at a faster pace than the number of male members. Male RPP membership increased by 7 per cent between 1997 and 2007, while RPP female membership increased by 28 per cent over the same period. Some other trends that the study discovered include: • Participation in private retirement savings plans was higher for those between 45 and 54 years old than for those between 35 and 44 years old. • Participation in private retirement savings plan was the highest for “prime-aged workers” (those aged between 35 and 54 years old). About 63 per cent of these tax filers participated in a private retirement savings plan in 2008. The 37 per cent who did not participate in any plan in this age group were mostly found in the lowest income quintile. • Participation in private retirement savings plans increased with income.
© Keith Bell/www.dreamstime.com
www.hria.ca O 19
Table of Contents for the Digital Edition of Network - Winter 2010
Network - Winter 2010
HRIA President’s Message
HRIA Board of Directors
The Legalities of Mandatory Retirement
Unwanted Early Retirement
Baby Boom or Bust Strategies for Dealing With a Rapidly Aging Workforce
Retirement: Private Savings Plan Contributions Decreasing
Baby Boomer Steps
Retirement Is About More Than Just Money
What‘s Happening Here? HR’s Evolving Role in Dealing With Different Generations
Retirees Need a Game Plan
The HR Office
Index of Advertisers
Network - Winter 2010