Myth 1 – Canadians aren’t saving enough for retirement

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A core argument for expanding the CPP is that Canadians are not currently saving enough for retirement. In fact, most Canadians adequately prepare for retirement—a conclusion reached by a major research working group created by Canada’s finance ministers back in 2009.

Analyses to the contrary tend to consider only the savings accumulated in formal pensions such as the Canada and Quebec Pension Plans, Registered Retirement Savings Plans (RRSPs), and Registered Pension Plans (RPPs). In 2014, the assets held in these accounts amounted to $3.3 trillion.

But Canadians also save in a number of other ways. For instance, in 2014, Canadians held an additional $9.5 trillion in assets split equally between financial assets (mostly stocks and bonds) and non-financial assets such as real estate. Even after deducting their debt load ($1.8 trillion), Canadians still had a net worth of $7.7 trillion outside of the formal pension system.

In addition, Canadians contribute more to private pensions than is generally thought. Pension expert Malcom Hamilton has shown that the household saving rate, which is how savings are often measured, can be misleading because it is derived from net savings (contributions to savings minus withdrawals from savings). This means that even if gross savings (not accounting for withdrawals) increase, net savings could fall if more is withdrawn from savings than contributed. The household saving rate has been falling as the population ages because an increasing number of Canadians are withdrawing savings for retirement, not because working-age Canadians are contributing less to pensions. Hamilton points out that private pension contributions to RRSPs and RPPs have actually increased as a percentage of employment income, nearly doubling from 7.7% in 1990 to 14.1% in 2012.

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