Canada’s pension system cracks the world’s top 10 – but there’s room for improvement

When it comes to government retirement benefits for its citizens, Canada is certainly world class.

According to The Wealth Professional, Canada has the ninth best pension system among 37 developed countries – this due to a recent ranking by the Melbourne Mercer Global Pension Index.

However, Dr. David Knox, author of the study, sees a few problems for Canada, despite its relatively high standing.

“Systems around the world are facing unprecedented life expectancy and rising pressure on public resources to support the health and welfare of older citizens. It’s imperative that policy makers reflect on the strengths and weaknesses of their systems to ensure stronger long-term outcomes for the retirees of the future,” he states in the article.

One of the problems in having a system where retirement savings plans are looked upon as “wealth,” rather than a pot of money earmarked for the future, is that people tend to dip into the account early, Dr. Knox tells The Wealth Professional.

In plainer terms, people look at their retirement savings account, which may contain tens of thousands, if not hundreds of thousands, and dip into it. That’s because, the article advises, “people feel more financially secure and are more likely to borrow (from) their retirement savings pre-retirement.”

Having those relatively fat retirement savings accounts also makes people more comfortable with debt, Dr. Knox states in the article.

“As the wealth of an individual grows, whether it be in home ownership, investment portfolios or their retirement savings, so does their comfort with amassing debt. The evidence suggests on a global basis, for every extra dollar a person has in pension assets, their net household debt rises by just under 50 cents.”

There’s another problem, the story notes. While Canadians have amassed a lot in retirement savings, there seems to be a discrepancy between the amount saved, and what they will actually need to fund their golden years.

“Canada currently has a US $2.5 trillion gap between existing retirement savings and future retirement needs,” states Jean-Philippe Provost of Mercer Canada in the article. “This gap reflects not only demographic forces, but also the combination of limited access to corporate pension plans for workers and a challenging long-term investment environment. Women are particularly affected by this savings gap,” he tells The Wealth Professional.

So the two takeaways here are this – try to avoid dipping into your retirement savings before you have retired, and be aware that you’ll need to save more than you have saved thus far.

The Saskatchewan Pension Plan has one-little heralded feature that prevents cookie jar raids. Funds contributed to SPP are “locked in,” meaning that you can’t access them until you start your retirement. Your retirement cookie jar remains sealed until that wonderful day when, freed from the bonds of work, you want to turn those savings into retirement income. Be sure to check out SPP today!

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, classic rock, and darts. You can follow him on Twitter – his handle is @AveryKerr22