Retirement savings of two-parent families have been increasing — thanks largely to wives’ growing pension coverage and RRSP savings, according to a new Statistics Canada report.

Although the proportion of hus-bands with a registered pension plan has dropped since 1991, this has been partially offset by an increase in pension plan membership among wives — particularly wives of high-income males, the report states. Middle-class couples are now more likely than ever to have two RPPs (see table).

The Pensions and retirement savings of families report, authored by René Morissette and Yuri Ostrovsky of StatsCan’s business and labour market analysis division, concludes that Canadian couples, on average, seem to be better prepared for retirement now than they were two decades ago.

But although the average retirement savings of couples grew from 1986 to 2004, Morissette acknowledges that the financial contribution of the wife’s pension to the couple’s retirement income will depend on the earnings on which the wife’s pension is based — and women tend to have lower average earnings than men.

Also, the study does not consider the possibility of marriage breakdown and its impact on the partners’ income in retirement.

“This is the first study in Canada that looks at pension coverage at the family level,” Morissette says. The report’s objective was to document the evolution of pension coverage and retirement savings of families from 1986 to 2004. And while pension coverage of younger men and women as a group fell during that period, as did coverage of men in the 35-54 age group, coverage of women in the latter age group increased.

Morissette notes that the wealth holdings of people in the 55 and older age group have also increased substantially over the past 20 years. So, preparedness for retirement in this age group has certainly not worsened. He is particularly concerned about those aged 25-34 — for whom pension coverage has fallen and wealth holdings have stagnated.

The report notes that decades ago, women married to high-income men typically did not work outside the home. Those married to lower-income men often did in order to alleviate tight family budgets. But since the 1970s, women married to higher-income men have increasingly entered the labour market. Since most of them are highly educated, they tend to have relatively good pension coverage.

However, pension coverage of young men and women has dropped for a variety of reasons, says the report: increased competition may have induced companies to cut labour costs by eliminating their pension plans; increased contributions to the Canada/Quebec pension plans may also have played a role; the high costs of running a defined-benefit pension plan may have led some companies to switch to group RRSPs and other forms of non-wage benefits. Another explanation is the possible shift of employment to low-coverage industries and the fact that unionized jobs, many of which offer RPPs, have become relatively less important.

According to the report, other surveys show the proportion of men with an RPP dropped by 10% between 1978 and 2004. In contrast, the proportion of women of working age who belonged to an RPP increased to 21% from 14% in that period.

But there are significant differences based on earnings. As expected, high-income couples have much better coverage than their low-income counterparts. Among couples in the bottom 20% of earners, 76% have no pension plans. In contrast, only 22% of couples in the highest-income group have no pension coverage; for 41% of couples in this latter group, both spouses belong to an RPP.

Amounts contributed to RRSPs and RPPs also varied widely according to income level. In 1986, for example, combined RRSP and RPP contributions made by couples at the top were at least $4,200 greater, on average, than those made by their counterparts at the bottom. In 2004, combined contributions by high-income couples were at least $7,700 greater, on average, than those of lower-income couples.

In other words, there is growing inequality in retirement savings, the authors say: “No doubt associated with the growth in family earnings inequality that took place between 1986 and 2004.”

For instance, couples in the 35-54 age group who were in the top 20% of earners saw their average earnings rise to $175,100 (in 2002 dollars) from $122,700 during this period. Those at the bottom experienced virtually no growth in employment income, to $25,000 in 2004 from $24,600 in 1986.

@page_break@The report notes several caveats. First, it does not consider the degree to which retirement savings are adequate to maintain living standards once couples retire. Second, the authors measured preparedness for retirement by using two approaches: the sum of contributions to RRSPs and RPPs; and a calculation based on the pension adjustment of individuals, implicitly adding in employer contributions to RPPs.

The authors also have not taken into account the shift to defined-contribution plans and group RRSPs from DB plans and the impact this will have on the economic security of workers. Nor have they considered the impact of increased longevity among seniors.

All told, the percentage of employed men with a DB RPP fell to 19% in 2005 from 32% in 1978, while the percentage of employed women with a DB plan increased to 17% from 13%. IE