Fewer Than One in Four Canadians Contribute to RRSPs

By Andrew Rickard | October 26 2015 09:33AM

A fact sheet published by the Office of the Chief Actuary reveals that fewer than one in four Canadians contributed to their RRSPs in 2013. What's more, it shows that defined benefit (DB) pension plan coverage in the Canadian private sector has declined significantly.

The Office of the Chief Actuary, which is an independent unit of the Office of the Superintendent of Financial Institutions (OSFI,) has published statistics on how many Canadians were covered by Registered Pension Plans (RPP) and used other types of retirement savings vehicles between 2003 and 2013.

While the total number of active RPP members has increased by 11% over this decade, going from from 5.6 million to 6.2 million, the total growth in population means that the percentage of people covered by an RPP has actually declined from 39% in 2003 to 38% in 2013.

The report also shows a marked shift away from defined benefit (DB) plans and towards defined contribution (DC) plans in the private sector. Of those employees in the private sector with an RPP, the proportion with a DB plan declined from 72% in 2003 to 42% in 2013. This is not the case, however, among government workers. In fact there was a slight increase in public sector DB coverage rates during the period, which went from 93% to 94%.

Most Canadians do not appear to be taking advantage of RRSPs and Tax Free Savings Accounts (TFSAs) in order to compensate for the lack of pension coverage at work. The OSFI numbers indicate that the proportion of tax filers who contributed to an RRSP has decreased from 26% in 2003 to 23% in 2013. 

The report points out that RRSP usage varies by income class. Those who earn $80,000 or more were the most likely to contribute, with 61% of tax filers in this demographic paying into RRSPs in 2013, down from 68% ten years earlier. On the other hand, there was a much larger decrease in RRSP usage during the period among those who earned between $20,000 and $40,000; in 2003 41% of people in this group contributed to RRSPs, while in 2013 this percentage had fallen to just 16%.

As for TFSAs, the report shows that the proportion of people who paid into this kind of plan increased from 19% in 2009 to 27% in 2013. Once again, it was the wealthiest group that was most likely to contribute; 30% of those who earned $80,000 more put money into their TFSAs in 2009, and this number increased to 38% in 2013. There was an also an increase in TFSA use in the $20,000 to $40,000 income bracket, but it was not commensurate with the decline in RRSP use; the proportion of people in this group who used TFSAs increased from 18% in 2003 to 26% in 2013.

While it considered participation rates, the OSFI report did not include data on the actual amount of money employers and tax filers put into their retirement savings plans.