There isn’t a retirement income crisis in Canada, according to a study.
The Fraser Institute study The Reality of Retirement Income in Canada finds that analysts, activists and politicians who advocate for expanding the Canada Pension Plan (CPP) base their arguments on several faulty assumptions, often overlooking all the resources available to Canadians in retirement.
“Proponents of a new government pension program for Ontario, and an expanded Canada Pension Plan, stoke fears of a looming crisis by claiming that Canadians aren’t saving enough for retirement,” says Philip Cross, author of the study and former chief economic analyst for Statistics Canada. “These claims blatantly ignore the ample resources available to Canadians when they retire.”
The study notes that focusing exclusively on the traditional three pillars of the pension system overlooks trillions of dollars in assets held by Canadians in home equity and other savings as well as undocumented support from family and friends.
In addition to accumulating large sums of assets, Canadians are waiting longer to retire. One in four Canadians between 65 and 70 years old now remain in the workforce—an increase from roughly one in eight just 13 years ago.
This delay in retirement allows more time to accumulate savings either inside the pension system or outside the system, and it postpones the drawing down of savings.
The study says an expanded CPP (or newly minted Ontario pension program) would require increased mandatory contributions from working Canadians that will likely reduce the amount of money Canadians invest voluntarily elsewhere.
“Past experience suggests that when governments increase mandatory pension contributions and force Canadians to save, Canadians tend to scale back their voluntary saving,” Cross explains.
While the study questions the necessity of an expanded mandatory pension system, it notes challenges that may currently exist, particularly for single seniors who never worked and aren’t eligible for CPP benefits. These Canadians often rely more heavily on old age security and the Guaranteed Income Supplement as sources of retirement income.
Cross says the “debate about retirement adequacy should shift to targeted solutions for particular segments of the population such as single seniors with no work history, and away from mandatory increases to CPP that would impact almost every working Canadian.”
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