(February 13 – 10:10 ET) – Residents of British Columbia plan to contribute less to their RRSPs in 2000.

A survey conducted in December by Ipsos-Reid for Credit Union Central of B.C. found that 55% of financial consumers in B.C. aged 18 to 69 have already contributed for the 2000 tax year, or plan to do so before the March 1 deadline. This indicates a downward trend from 57% in 1999 and 62% in 1998.

The main reason given for not contributing to an RRSP this year is that they simply can’t afford it. “Considering that British Columbians, on average, carry higher short-term debt than residents of other provinces, some will likely decide to pay down debt before making an RRSP contribution,” Wayne Nygren, Central’s president and CEO says.

Not surprisingly, incomes are a factor in RRSP contributions — 77% of those with household incomes of $60,000 or more plan to contribute, 50% of those with household incomes of between $30,000 and $60,000 intend to contribute, compared to only 21% of those with household incomes of $30,000 or less.

More than half, or 51%, of 18- to 34-year-old financial consumers say that they have made, or plan to make, a contribution to their RRSP for the 2000 tax year. The total is up slightly from 49% for the 1999 tax year. Of those aged 35 to 54, 65% will likely make a contribution. Of those between the ages of 55 and 69, only 43% intend to contribute this year, down from 48% in 1999.

“These findings indicate that more young British Columbians are aware that starting an RRSP at an early age will help them build their savings for a comfortable retirement,” says Nygren.

Younger RRSP contributors differ from their elders in how they will contribute. Only 49% of those aged 18 to 34 will make one or more lump sum contributions to their RRSP, while 61% of those aged 35-54 and 76% of those between the ages of 55 and 69 favour this method. Those under 35 are much more likely to make regular contributions on a biweekly or monthly basis, with 76% saying that they contribute in this way.

The survey found that mutual funds are still the investments of choice for many RRSP contributors. Two-thirds of all contributors say that they will invest some or all of their RRSP monies in mutual funds for the 2000 tax year, while 24% plan to invest in stocks. Meanwhile, term deposits have declined in popularity, appealing to only 17% of contributors, compared to 28% in 1999. Bonds remain a minority choice, with 13% saying they intend to invest in those products.

“Fluctuations in the markets do not seem to have deterred British Columbians from investing their RRSP contributions in mutual funds and stocks,” says Nygren. “They recognize the importance of a long-term strategy when saving for retirement.”
-IE Staff