Fewer than half of employed Canadians have a workplace pension plan, a new survey says.
IG said the findings reflect a “generational shift” as large employers continue to phase out pension plans. That shift began three decades ago, resulting in a greater number of Canadians lacking the same level of guaranteed income as earlier generations.
“The decline of defined benefit and contribution pension plans has fundamentally shifted the burden of retirement planning on to individuals in recent years,” IG Wealth Management head of financial planning Christine Van Cauwenberghe said in a press release.
“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.”
The online survey of 1,350 Canadian adults from Jan. 9 and 14 found that only one-third of respondents have a retirement plan and savings. Just 11 percent know how much annual income they will require once retired, while 49 percent say they have no idea whatsoever.
The survey also indicated that approximately 25 percent of individuals holding employer-sponsored pensions were unaware of the specifics of their plans, including whether they are classified as defined benefit or defined contribution plans.
The survey also revealed knowledge deficiencies among Canadians, even as they must increasingly depend on their personal savings.
Only two-fifths of those polled had an understanding of Old Age Security, Registered Retirement Income Funds, or how retirement income is taxed by the government.
Further, the study found that a limited number of individuals have considered inflation, health care expenses, market declines, or longevity risk in their retirement strategies—and 67 percent have not subjected their plans to stress testing against any significant economic or financial risks.
The knowledge gaps are further exacerbated by a rising emotional pressure about retirement, the report said. Fifty-three percent of Canadians who have not yet retired harbour negative sentiments about retirement, saying that they believe they are falling short in their savings and are doubtful about their capacity to retire at all.
“This growing pessimism not only reflects their financial uncertainty but also creates a cycle of inaction, as anxiety becomes a major barrier to take meaningful steps toward improving their retirement outlook,” Van Cauwenberghe said.
Data in recent years shows Canadians prefer financial instruments that are more focused on tax-free savings rather than retirement planning.
The agency discovered that 11.3 million tax filers contributed to either a registered retirement savings plan (RRSP) or a tax-free savings account (TFSA).
Among this group, 3.8 million made contributions solely to their RRSP, while 5 million contributed exclusively to their TFSA. Approximately 2.5 million contributed to both their TFSA and RRSP.
