Most Canadians actively saving for retirement

Census indicates 65.2% of people contributed to a plan in 2015

Two-thirds of households are setting aside money for retirement, taking advantage of either a registered pension plan, an RRSP or a tax-free savings account (TFSA), Statistics Canada said Wednesday as it released the latest batch of numbers from the 2016 census.

Of 14 million households, 65.2 per cent made a contribution in 2015 — the most recent year for which data was available — to one or more of the three major savings vehicles, a counterpoint to the prevailing narrative that many Canadians are cavalier about retirement.

Different generations took different approaches: major income earners aged 35 to 54 were prone to make use of registered pension plans and RRSPs, while those younger than 35 and those older than 54 were more likely to contribute to a TFSA. Or, in Statistics Canada’s words: “Participation in savings plans followed strong life-cycle patterns.”

It’s the first time the census has probed the question, taking advantage of tax data to paint a more accurate picture of just how seriously Canadians take it — a picture that experts say has long been distorted by suspect data and aggressive investment marketing.

“I think things in general are still in pretty good shape when it comes to preparing for retirement,” said Fred Vettese, chief actuary at Morneau Shepell.

“With an aging population and more people drawing an income than used to be the case back in the 1990s, obviously it’s going to look like people are saving less.”

FRED VETTESE CHIEF ACTUARY AT MORNEAU SHEPELL

“For the most part, when you look at middle-income Canadians, they are saving. So one of the problems with the statistics is that they end up being misleading.”

Vettese said he’s particularly frustrated by the oft-cited national household saving rate, which landed at 4.6 per cent in the second quarter of this year, compared with 20 per cent in 1980.

“That’s the stat that people keep on harping on, and it has dropped a lot — but that household saving rate is a funny number.”

For starters, household saving doesn’t include Canada Pension Plan contributions — “for most people, you figure that their CPP contributions are savings for retirement,” Vettese said.

This means that federal efforts to enhance the pension plan won’t change that figure “one iota.”

What’s more, Vettese said, the household saving rate deducts what retired Canadians might take out of their nest egg once it becomes a source of income.

“So, with an aging population and more people drawing an income than used to be the case back in the 1990s, obviously it’s going to look like people are saving less.”

Research compiled by actuary Malcolm Hamilton of the C.D. Howe Institute suggests that the rate of retirement saving for employed people has actually almost doubled in recent decades.

Hamilton’s data-crunching exercise — which sought to correct for household saving’s shortcomings — showed a surge between 1990 and 2012 in contributions to retirement savings plans, even as household saving dropped sharply. Over that 22-year period, contributions went from 7.7 per cent of earnings to 14.1 per cent.

Of the 45 per cent of major income earners aged 15 to 24 who saved for retirement in 2015, 33.5 per cent opted for TFSAs, compared to 14.3 per cent who contributed to an RRSP. For 25 to 34 year olds, 42 per cent put money in a TFSA, versus 37.3 per cent for an RRSP.