Close to half of non-retired Canadians have just $5K in savings: HOOPP study

Canadians within sight of the retirement finish line may have to put off their golden years, thanks to a lack of savings.

That’s one of the findings from new research by the Healthcare of Ontario Pension Plan (HOOPP) and Abacus Data, reported on by Global News.

“With a prolonged period of rising inflation and interest rates, Canadians of all ages are finding it much harder to save for retirement, and specifically the older age group that really should be looking forward to retirement,” said HOOPP’s Ivana Zanardo states in the Global News article.

Inflation is still more than twice as high as the Bank of Canada’s target of two per cent, the article adds.

A sobering finding from the research, Global reports, is that “44 per cent of non-retired Canadians aged 55 to 64 have less than $5,000 in savings, with one in five from that group saying they have not set anything aside for retirement.”

“The picture is bleak for those older Canadians,” states Zanardo in the article.

The lack of personal savings and persistent inflation, the article notes, have some older Canadians rethinking the whole retirement thing.

“More than half of those surveyed aged 55 to 64 said if inflation keeps rising, they will have to push back their intended retirement date,” the article notes.

“What really stood out for us this year and what was concerning is the older age group, and the fact that they’re just not as prepared for retirement as one would hope they would be,” Zanardo tells Global News.

“At a period in their life when they should be getting excited about retirement, because of inflation and rising interest rates they’re now considering whether they can retire when they had planned on and whether they should be pushing that day out,” she tells the broadcaster.

Abacus Data CEO David Coletto, who has been aiding HOOPP’s research efforts for five years, notes that “70 per cent of respondents have consistently agreed that Canada is heading for a retirement crisis.”

Coletto spoke a while ago to Save with SPP about millennials and their attitudes to retirement saving — you can see that interview here.

Even though experts like Zanardo recommend saving for retirement “early… and often,” the research found that 44 per cent of respondents had not set aside any retirement savings in the previous year. The research found that 70 per cent of those surveyed “would take lower pay in exchange for a better pension.”

If you are fortunate enough to have any sort of retirement savings program at work, be sure you are contributing to the max. If you don’t have a workplace plan and haven’t really got going yet on retirement savings, the Saskatchewan Pension Plan may be just what you’re looking for. You decide how much you want to contribute each year — any amount up to the available registered retirement savings plan room you have. You can make your contributions automatic, like a workplace plan, by arranging for pre-authorized contributions direct from your bank account. Or, you can set up SPP as an online bill and pay yourself monthly, along with your heat, light and credit cards. You can even pay by credit card.

No matter how the contributions get to SPP, our team will professionally invest them in a pooled fund for a low cost. They’ll grow your savings, and when it’s finally time to escape from work, SPP will offer you a variety of retirement income options, including the chance at a lifetime monthly annuity payment. Check out SPP today!

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HOOPP research shows saving for retirement is a struggle for most

New research from the Healthcare of Ontario Pension Plan (HOOPP) finds that while Canadians view retirement savings as a priority, few are able to do much about it.

A media release from HOOPP outlines some of the key findings of the research, carried out for HOOPP by Abacus Data.

“Saving for retirement is the number two priority amongst Canadians, with 53 per cent citing it (affording the day to day was number one, at 62 per cent), but many are struggling to accomplish it. Thirty-two per cent of working Canadians said they have yet to save anything for retirement, and 38 per cent said they have saved nothing for retirement in the past year,” notes the release. 

So, how are people planning to pay for their retirement, if they aren’t saving?

The research found that “nearly half of Canadian homeowners are planning to rely on the sale of a home to set themselves up for retirement (45 per cent), but that plan is becoming increasingly risky in the current environment,” HOOPP reports.

“The general outlook for retirement security in Canada is darkening,” states David Coletto, CEO of Abacus Data, in the release. “Seventy-five per cent of all Canadians agree there is an emerging retirement crisis in Canada and 72 per cent feel that saving for retirement is prohibitively expensive — both up seven points over last year. And if current trends continue, it will be tougher for younger generations.”

David Coletto spoke to Save with SPP a couple of years ago on the issue of millennials and retirement saving.

So if, as the research suggests, the price of housing is so high that there’s no way to get into real estate while also saving for retirement, what’s the solution?

HOOPP’s Senior Vice President of Plan Operations, Steven McCormick, states in the release that the answer may be wider access to workplace pensions.

“Savings challenges are more acute for younger adults, but there is an agreement across generations that an important solution to the problem is better workplace retirement savings plans, and that everyone has a role to play on this front,” states McCormick in the article.

The release notes three interesting findings from the research:

• 82 per cent of Canadians agreed that all workers should have access to a pension that guarantees a percentage of their working income in retirement. Sixty-six per cent are willing to pay for this access themselves by accepting a slightly lower salary in exchange for a better (or any) pension.
• 77 per cent agreed that all employers should be required to contribute in some way towards pensions for all workers, and 74 per cent agree governments could save money by supporting pensions that are more efficient.
• 83 per cent agreed that without good pension plans at work, many Canadian seniors will experience poverty and 77 per cent said workers without pensions will become a burden on the taxpayer. 

HOOPP has long been an advocate for retirement income security, and their latest round of research clearly shows that the problem of having enough to live on in retirement is not one that is going away.

If you don’t have a workplace pension plan – and are one of the majority of Canadians who want access to one – take a look at the Saskatchewan Pension Plan, which is open to any Canadian with registered retirement savings plan room.

SPP offers a voluntary defined contribution plan – the money you contribute is pooled for investment efficiency, professionally invested, and – at retirement – can be converted to retirement income, including the option of a lifetime annuity. SPP has been delivering retirement security since 1986. Check them out today.

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It’s clear to most of us – especially older Canadians – that younger people have a very different way of doing things. So that said, what do they think about retirement?

Save with SPP spoke recently to David Coletto, founding partner and CEO of research firm Abacus Data. His firm has carried out a lot of research on millennials – indeed, he has a book in the works – and he has noticed quite a few things about how younger people approach money and saving.

“No one young Canadian is going to be the same,” he says. As well, he adds, the current COVID-19 situation was not yet a factor when he carried out his research. However, he notes that the data suggests that some millennials are “as well off as the previous generation,” but others, less so. It really comes down to whether or not they live somewhere where they can afford a home, he explains.

There are reasons why housing affordability is an issue for millennials, he notes. For starters, housing prices in Canada’s major cities are near all-time highs. As a group, millennials do tend to have debt, and “the debt levels are much higher” than those of older generations, he explains. Dealing with heavy debt from student days, or the cost of raising kids, tends to “delay key milestones” for millennials.

“So much of their experience is different,” he says, “that it is difficult for them (millennials) to think of retirement when they are still focused on today. About one-third of this generation is struggling more than their parents did, and they will be less well off as a result.”

Abacus recently did some research with the Healthcare of Ontario Pension Plan that found, among other things, that 80 per cent of respondents would take a job that paid less money if it offered a pension.

Job security isn’t what it once was, Coletto explains. “There’s more freelance work, more part-time work – what we call precarious work, and less pensions available.”

When there’s no workplace pension, the onus for retirement saving falls on the individual. “It’s lower on the list for them, and saving (for retirement) is difficult to do,” he explains. “They are having to manage a lot of other expenses. And we are talking about the pre-COVID era, here.”

“It’s a big chunk that has to go to savings for a down payment, or to pay for a mortgage,” he says.

And it’s not just the workplace that has changed. Millennials are dealing with “a climate change crisis that is existential.” Some “are putting off having a family” over climate concerns, he says.

Millennials therefore tend to want to do things now, while they still can, instead of deferring life experiences and grand trips until they are older. “If the experiences won’t be there, or are not possible, what’s the point of trying to save? Especially when you can’t afford to,” asks Coletto.

Statistics show that only “one in four millennials put any money into an RRSP, and even those that do don’t have a lot of equity in them,” Coletto explains. And while Tax Free Savings Accounts are more attractive to younger people (due to the fact they aren’t locked in) take-up is pretty low there as well.

Absent personal savings, Coletto is concerned that the gap between those with pensions – such as their parents – and those without will create a real split. “There’s an inequality there which will continue to grow,” he predicts.

A way to avoid that scenario might be for Canada to adopt the Australian model for retirement savings, he explains. There, a percentage of every worker’s salary is automatically placed into retirement savings, no matter where you work. The money is then invested by large funds offering pooling and low-cost investing. Moving to an Australian model is “something that needs to be seriously discussed,” he says.

A final piece of advice from Coletto for millennials is this – look at what your parents did for their retirement, and see what you can learn from them.

We thank David Coletto for taking the time to speak with us.

There’s no question that access to a workplace pension is a great benefit for an employer to offer. The Saskatchewan Pension Plan can help. Please contact us for more details.

Written by Martin Biefer
	Martin Biefer is Senior Pension Writer at Avery & Kerr Communications in Nepean, Ontario. A veteran reporter, editor and pension communicator, he’s now a freelancer. Interests include golf, line dancing and classic rock. He and his wife live with their Shelties, Duncan and Phoebe, and cat, Toobins. You can follow him on Twitter – his handle is @AveryKerr22