Pension plan coverage and RRSP usage have declined, in percentage terms, since 2003, being surpassed in overall usage by tax-free savings accounts (TFSAs), whose use has risen dramatically since their introduction in 2009, according to new data from the Office of the Superintendent of Financial Institutions (OSFI).
Although the total number of active registered pension plan (RPP) members in Canada has increased to 6.2 million in 2013 from 5.6 million in 2003, the number of active RPP members as a percentage of the labour force decreased slightly over the same period, to 32% in 2013 from 33% in 2003, OSFI reports. Similarly, the proportion of employees covered by an RPP declined to 38% from 39% during that time.
Moreover, all of the growth in RPP membership came in the public sector, in which RPP coverage increased to 3.2 million active RPP members, or 87% of the total, in 2013 from 2.6 million, or 86%, in 2003. Conversely, pension coverage in the private sector decreased to 24% in 2013 from 27% in 2003 as the number of active RPP members has remained constant, at around three million.
OSFI also reports that the shift to defined contribution (DC) pension plans from defined benefit (DB) pension plans is also continuing. Overall, the proportion of active RPP members in DB plans has declined to 71% in 2013 from 82% in 2003. Again, this is all happening in the private sector, as DB pension plan coverage has plunged to 47% from 72% whereas, in the public sector, DB pension plan coverage has increased slightly, to 94% from 93%.
Meanwhile, the total number of tax filers who contributed to an RRSP remained the same, at six million, from 2003 to 2013, but the proportion decreased to 23% in 2013 from 26% in 2003, OSFI reports. Contribution rates dropped across all age groups, except for those over the age of 65, the data show; and, the average age of RRSP contributors increased to 46 from 43 during this 10-year period. The 45-54 age group remains the most likely contributors, but this is down to 37% in 2013 from 40% in 2003.
Looking at RRSP contributions by income level, contribution rates dropped in every category except for those earning between $60,000 and $80,000 a year, as 44% contributed to an RRSP in 2013 vs 41% in 2003. Those in the highest-earning group, more than $80,000 a year, saw the contribution rate decline to 61% in 2013 from 68% in 2003.
The picture is quite different when it comes to the usage of TFSAs, as OSFI reports that there were 10.7 million TFSA holders, which represents 42% of tax filers, as of the end of 2013. In fact, the number of TFSA holders who contributed to a TFSA increased to 6.8 million in 2013, or 27% of tax filers, from 4.5 million, or 19% of tax filers, in 2009, when TFSAs first became available.
The proportion of tax filers who contributed to their TFSAs increased across all age groups, with those aged 65 and older most likely to contribute, up to 32% in 2013 from 26% in 2009. Again, higher-income earners are also most likely contributors, with 38% of those earning more than $80,000 contributing in 2013, up from 30% in 2009.