Less than one third of Canadians know that they can boost their monthly public pension by delaying the start of payments beyond age 65, the Retirement and Savings Institute's (RSI) 2023 Index finds.

These public plans are the Old Age Security (OAS) pension under the Canada Pension Plan (CPP) and the Quebec Pension Plan (QPP), administered by Retraite Québec. 

The RSI Index measures Canadians' knowledge of their retirement income system. The Institute, created by HEC Montréal, has published this index annually since 2019. The 2023 edition is based on a survey of 3,004 Canadians aged 35 to 54. Participants answered 29 financial knowledge questions.

Almost half of the respondents had already taken the survey at least once before. The RSI points out that returning respondents did no better than the other participants. 

Knowledge stagnating 

The overall index was 36.6 per cent in 2023, compared with 35.7 per cent in 2022. This result is only slightly higher than the first edition (2019), when the IRE Index was 36.5 per cent. The fifth edition of this index shows that the financial knowledge of Quebecers and Canadians has remained stable, the research report notes.

On average, respondents replied “don’t’ know” to more than a third of the questions. Some questions were general, while others were specific to retirement plans. Questions covered topics such as RRSPs, Tax-Free Savings Accounts (TFSAs), employer plans and public plans. 

As was the case in 2022, participants’ average score improves as they approach retirement. It exceeds the global Index (36.6 per cent) starting from age 45. Respondents aged 45 to 49 score 39.2 per cent. The score for 50 to 54 year-olds is slightly lower than for 45 to 49 year-olds, at 38.8 per cent. 

Little knowledge of inflation 

In general knowledge, understanding of inflation has risen from 61 per cent to 68 per cent over the past years. A score the IRE considers “surprisingly low.” In a question on purchasing power, the IRE pollsters asked: “Imagine that the interest rate on your savings account was one per cent per year and inflation was two per cent per year. After one year, with the money in this account, would you be able to buy… (more, exactly the same, or less than today)?” Participants were also asked how much a $100 account would be worth in five years, at an annual interest rate of two per cent. They did particularly well on this question. 

In contrast, they scored lowest on the bond question. The survey asked what would happen to bond prices if interest rates rose. Generally, a rise in interest rates has a downward effect on the value of bonds.

Results are mixed when it comes to debt doubling. Pollsters asked how long it would take a $1,000 loan at 20 per cent compound interest to double if no repayments were made. The answer is four years. 

Regarding investment diversification, respondents were asked whether it is true or false that buying a single company’s stock usually provides a safer return than an equity mutual fund. The correct answer is “false.” 

Another question dealt with mortgages. “A 15-year mortgage typically requires higher monthly payments than a 30-year mortgage, but the total interest paid over the life of the loan will be less,” the RSI asked. The correct answer is “true.”