New research commissioned by the Canadian Pension Plan Leadership Council (CPPLC) finds that Canadians want steady retirement income — and worry about running out of money in retirement.

We reached out to Alison McKay, who is the Co-Chair of the CPPLC, to ask a few questions about the findings.

The research suggests Canadians prefer plans that offered inflation-protected guaranteed income, and that fear of running out of money is a primary stress driver. While defined benefit (DB) style plans offer this sort of income you can’t run out of, defined contribution (DC) plans and registered retirement savings plans (RRSPs) don’t automatically do this. Should there be more awareness of the value of annuities in capital accumulation plans?

The stress many people feel planning for retirement underscores the need to enhance financial literacy among Canadians and raise awareness about their retirement planning options. Increasing costs of living and how to draw down on savings are two major challenges that retirees can better overcome with the right plan and planning. The research shows that promoting education, awareness, and incentives that highlight the value of retirement income options can improve retirement readiness, including options that offer a solution to safeguard against longevity risks if their workplace plan does not include such features.

It was encouraging to see the stat that a quarter of respondents rate retirement planning as an 8/10 factor when choosing careers. Does this mean that people are (finally) starting to focus on workplace retirement benefits as being as important as salary?

The research indicates that Canadians are considering their personal well-being in addition to traditional career-related factors, like salary, when making their career decisions and choosing employers. Given the potential impact of retirement planning stress on personal health, Canadians may view workplace pension plans as a benefit that serves their financial savings and well-being goals. It is notable that in both surveys, Canadians highly rated plans that provide predictable and monthly income, that is guaranteed to be paid for life, and that has inflation protection.

Is the fear of running out of money in retirement (hence the desire by so many for the lifetime, inflation protected monthly pensions) driven by the lack of independence this might create – such as having to downsize or rent unexpectedly, or depend on friends and family for financial help?

Canadians consistently rated “running out of money once retired” (47 per cent) as their biggest retirement savings stress. The next top concerns were consistently “being dependent on family once retired” (38 per cent) and “being dependent on social programs once retired” (34 per cent). This aligns with your suggestion that a lack of independence may drive some Canadians’ retirement planning stress.

We also see that Canadians express a strong desire for predictable, lifetime guaranteed income that is inflation-adjusted, while also placing priority on maintaining of their standard of living during retirement. However, the report highlights a significant gap in retirement income coverage, with only 29 per cent of Canadians feeling confident about retiring at their desired age and maintaining their desired standard of living.

Making a significant change like unexpectedly needing to move or depend on family can be a stressful situation at any point in a person’s life; it’s more stressful when you’re not earning a wage or salary, as in the case of retirees. The report emphasizes the importance of expanding retirement income coverage in Canada to address the concerns of Canadians and enhance overall retirement preparedness to achieve retirement goals and secure financial well-being during retirement.

The study’s results suggest that people are dipping into their retirement savings due to factors like higher prices, and as well, taking on more debt than usual. Are these the chief reasons that those without workplace pensions aren’t able to save for retirement?

Canadians have lost confidence in retiring on-time and debt-free. While we have seen significant economic volatility in recent years, the low confidence is specifically affecting Canadians without access to a workplace pension. Only one-in-five feel confident in their ability to retire when they want and maintain their standard of living, compared to the one-in-three with access to a workplace pension who lack confidence about reaching the same goals.

The lack of confidence in managing their own retirement savings plans further highlights the need for workplace pension plans that help Canadians save efficiently and automatically. The study also found that Canadians consistently report they are not well informed about sources of retirement income. Expanding retirement income coverage in Canada and investing in financial literacy programs can contribute to improving retirement readiness for Canadians.

What finding surprised you the most from this research?

The survey presented a valuable opportunity to gauge Canadians’ sentiments regarding their finances and retirement plans. While the results are somewhat expected given the economic climate in 2022, a surprising finding is the effects of retirement-related stress on individuals and families.

Something that differentiates the survey from many others is that we specifically asked about stress related to retirement planning, not general financial stress. The study points out that stress, specifically about retirement, permeates various aspects of Canadians’ lives. Notably, the research reveals an increase in retirement-related stress from 2016 to 2022, impacting both Canadians’ personal health and career decisions.

Almost half of those surveyed (47 per cent ) reported that the stress of planning for retirement affects their health, at least moderately. Of that group, 28 per cent said that stress about retirement highly effects their personal health. As 60 per cent of Canadians do not have a workplace pension plan, these findings underscore the significance of addressing retirement planning concerns and the importance of expanding retirement income coverage in Canada.

We thank Alison McKay and CPPLC for taking the time to answer our questions!

If you don’t have a workplace savings program, and are relying on your own investment skills to save for retirement, you may want to take a look at the Saskatchewan Pension Plan. Open to any Canadian with RRSP room, SPP is a voluntary defined contribution plan featuring pooled investing at a low cost. You decide how much to contribute, and SPP looks after growing your savings until it’s time to turn them into income. Check out SPP today!

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There have been reports from around the world about The Great Resignation – how the stress and strain of working through the pandemic crisis has prompted many to opt out of the workforce altogether.

In Canada, reports The Globe and Mail, the primary way that Canucks are leaving the workforce is via retirement.

“Last week’s July employment report from Statistics Canada revealed that a record 300,000 Canadians have retired over the past 12 months,” writes columnist David Parkinson. “That’s up nearly 30 per cent from the same time last year, and nearly 15 per cent from the months leading up to the pandemic in early 2020,” he continues.

One might think that older workers leaving the workforce – boomers and near-boomers finally giving back their ID badge and parking pass – might be good news for younger workers.

However, the Globe continues, there may also be a downside to this “retirement frenzy.” The article quotes economist Stephen Brown as saying “the sharp increase in retirees this year presents downside risks to our forecasts for employment, and with gross domestic product (GDP) growth already faltering, further raises the probability that economic activity will contract.”

The article links today’s record-low unemployment rate with a less-good stat, a falling job participation rate. In plainer terms, less joblessness, yes, but overall, less people working. “All this poses downside risks for GDP, particularly if retirements increase any further,” notes Brown in the article.

A clearer example of The Great Resignation’s impacts can be gleaned from an article in Manitoba’s Thompson Citizen. In Northern Manitoba, the article reports, recruitment bonuses of up to $6,750 – bonuses that continue on after hire – are being offered to try and get nursing positions filled in remote First Nations’ facilities. A lack of healthcare staffing has sparked a crisis in the area, the newspaper reports.

In Northern Ontario, the CBC reports, the mining and supply industry is also seeing “a shrinking and aging labour force,” and a “scramble” to fill open jobs.

“You’re going to see businesses closing because they can’t find enough people. And then it could also be putting more pressure on the people that are currently working,” Reggie Calverson of the Sudbury Manitoulin Workforce Planning Board tells the CBC.

There, technology is being deployed to automate some jobs – more AI, more robots, self-checkouts and virtual customer service, the CBC report notes.

And the younger workers left behind as their older colleagues “resign” or retire are indeed finding it a strain to pick up the slack, reports Time magazine via Yahoo!.

Many, the magazine reports, are “quiet quitting,” which is “the concept of no longer going above and beyond, and instead doing what their job description requires of them and only that.”

Employers in the U.S. and elsewhere fear that while “quiet quitters” will avoid job burnout by leaving at quitting time and not dealing with after-hours emails and meetings, overall productivity could be impacted at a time when there are fewer workers in the job pool.

How to incent workers who feel “unengaged?” A Globe and Mail piece by Jared Lindzon suggests more bonus pay, such as commissions, or even retirement-related incentives.

Many employers are considering offering matching contributions to their company’s retirement program, or setting up new programs, the article says.

It’s interesting to read that for some experts, a wave of retirements is negative for the economy. Canadian research from a few years ago suggests that retired workers do give the economy a boost via their pensions, which they tend to spend on goods and services and taxes.

A study last year carried out for the Canadian Public Pension Plan Leadership Council (CPPLC) by the Canadian Centre for Economic Analysis found that “every $10 of pension payments generates $16.70 of economic activity and makes a total contribution of $82 billion to Canada’s economy annually,” reports Benefits Canada.

OK, a lot going on here. People are retiring in droves, particularly those aged 55 to 65. It’s harder to fill jobs. Those in jobs are feeling overburdened, perhaps thanks to the fact that older colleagues have left and have not been replaced. While some fear this Great Resignation will negatively impact the economy, others who feel retirees are already helping out the economy may see this as more good news.

So let’s look at retirement savings in a new way. What can you, as an individual, do to help the Canadian economy in the future? Why, you can save for retirement and then, when you are there, spend your income on goods and services, while paying your taxes. That helps your local economy and your local and federal governments.

If you are in a workplace pension plan, you are on the right path. But if not – or you want to augment the plan you have – consider the Saskatchewan Pension Plan. Consider joining the 400 businesses offering SPP and its 32,000 members whose retirement savings now represent an impressive $600 million.

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A new study has found that every $10 of public sector pension that is paid out to a retired member returns $16.72 of activity in the Canadian economy.

The study was produced by the Canadian Centre for Economic Analysis on behalf of the Canadian Public Pension Leadership Council.

Save with SPP spoke with Derek Dobson, CEO and Plan Manager of the Colleges of Applied Arts & Technology Pension Plan (CAAT) and a Co-chair of the Council, to further explore the survey’s results, and to talk generally about the value of pension programs.

He notes that the study is “agnostic” about what type of pension plan is producing the $10 spent by its retired members.

“Any plan that uses experienced investment professionals, and pooling – I include the Saskatchewan Pension Plan as an example of that – is delivering pensions efficiently,” he explains. So whether the $10 is produced by an efficient defined benefit (DB) plan or an efficient defined contribution (DC) plan, the economic benefits are the same.

The study noted that – looking at public sector pension plans only — $82 billion of economic activity was generated in 2019, “supporting 877,100 jobs and $33 billion in wages for Canadians,” according to the study’s executive summary. Governments gain $21 billion in tax revenue, the study notes. Collectively, Canadian public sector DB plans have an eye-popping $1.27 trillion in assets.

While the study found pension spending generally benefited all Canadians, one interesting aspect was that rural businesses seemed to derive more positive gain from local public sector pensioners.

Dobson says part of the reason for this may be the current trend towards a migration from expensive city living to more affordable smaller centres. “The housing is more affordable in smaller cities and towns,” he says. “We also found that those living in smaller towns tend to spend more locally than those in cities – so that is part of the reason the economic benefits of pensioners had a 6.5 per cent bump” in rural areas when compared to urban centres.

Given the “win win” nature of having a good pension plan – the retired member gets the steady, predictable income, while the economy benefits from it being spent – we asked Derek Dobson if there should be wider availability of good pension plans for those who lack them.

CAAT’s own DBplus pension plan, a program that offers a strong, secure lifetime pension program, has grown in just two years to include 200 participating employers. “We are trying to remove barriers to access to good pensions,” Dobson explains.

A good pension, he explains, has the added benefit of helping employers attract and retain good employees. It delivers twice the retirement benefits per dollar saved than investing independently in Group RRSPs, and helps employees reach their retirement goals faster with employer-matched contributions. Dobson says it is a shame to see well-trained healthcare workers and engineers leave the country for jobs elsewhere – a good pension program can keep them here in Canada.

Another advantage for employers is that if a pension plan is offered by a third party rather than being administered and funded by the employer, it’s a time, risk and funding relief for the employer. “No Chief Financial Officer in the private sector wants to see pension liabilities on their balance sheet,” he explains. With DBplus, the employer’s pension cost is a fixed amount.

“Many studies have shown that year after year, more and more Canadian workers are willing to forego more pay in order to get a better pension,” he says.

The only three organizations he currently sees as trying to bring pension coverage to underserved sectors are CAAT, through its DBplus program, the OPSEU Pension Trust, through its similar OPTrust Select plan, and the Saskatchewan Pension Plan through its voluntary, open defined contribution program.

Dobson concludes by saying that Canada has become known around the world for the efficiency of its pension system, the “Maple Model” of pension plan that feature pooling, low administration costs, expert investing, and joint governance where members and employers have an equal say in how the systems are run.

“Public service pension plans are an amazing and unique asset for Canada. So the more people that can be brought in, the better – pensions really help workers, retirees, their families and the economy.”

We thank Derek Dobson for taking the time to speak with us.

Did you know that the Saskatchewan Pension Plan has, according to its 2020 Annual Report, has more than $528 million in assets and 32,613 members? This growing open defined contribution plan is designed specifically for those without a workplace pension – a made-in-Saskatchewan solution to the problem of retirement saving for individuals and businesses. Check them out today.

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