With the looming retirement of the baby boom generation, the fact that recent government research shows that less than half of households enjoy a workplace pension and that the prevalence of other retirement assets has stalled, represents a concern, suggests a new report from Scotiabank Economics.
In a new report, Scotia drills into the 2012 Survey of Financial Security, which was released by Statistics Canada in late February. The survey reported that household net worth has risen steadily since the first edition of this research back in 1999, and again since the second edition in 2005. Higher real estate and retirement savings (including both workplace pensions and tax-sheltered vehicles such as RRSPs) are the primary drivers of that increase.
However, the Scotia report suggests that the proportion of the population with retirement savings is a worry, given the country’s demographics. “Of concern, given the imminent retirement of Canada’s large baby boom generation, is the modest rise in the share of national households reporting an employer plan to 48.5%, with the share of families with other retirement assets unchanged at 59% from 1999 to 2012,” it says.
Indeed, the report notes that RRSPs and related assets accounted for a 41% share of total private pension saving back in 1999, but that this has fallen to 34% in 2012.
Scotia notes that the lack of growth is RRSP holdings may be due to the introduction of TFSAs in 2009, as one-third of households report holding a TFSA as of 2012, with a median value of $10,000.
And, it points out that those with RRSPs have seen respectable growth in their holdings. “For those households with RRSPs and similar vehicles, the national median value climbed 4.8% annually over the thirteen years to 2012,” the report says.
The report also delves into the geographic distribution of these assets. “Leading the provinces in the median value of RRSPs and related holdings at roughly $50,000 are Newfoundland & Labrador, Ontario, Saskatchewan and B.C.,” it says.
For employer pension plans, Scotia reports that the Atlantic Provinces had the highest median household value of $151,700 in 2012, and they were held by a relatively high share of households. Median pension values were similarly high in B.C, it notes, at just under the $150,000 mark, but they were held by smaller share of families.
In the Prairies, median pension plan values were lower than in the Atlantic region and B.C., it says, noting that this “may partially reflect their younger age profile.” Yet, it also reports that “Saskatchewan and Manitoba led the provinces in the share of households participating in employer pension plans.”
However, the report also notes that in Alberta, lower median values were coupled with a below-average share of households belonging to a workplace plan.
Finally, the report says that all provinces reported that at least 90% of households have other financial assets, apart from private retirement holdings, such as bank deposits or other instruments; although the value of these holdings is much lower than their retirement savings. “The 2012 median value per household was uniformly low, between $5,000 in the Atlantic Provinces and $14,500 in British Columbia,” it says.