Increased pension contributions only partly offset by lower RRSP savings

OTTAWA -- A new report by Statistics Canada says automatic increases in registered pension plans are most helpful to people who don't save much in registered retirement savings plans.

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The report noted that there is some reduction in RRSP investments when pension plan contributions are increased, but the automatic increases are a net benefit.

"Moreover, the response tends to be smaller for workers with weaker histories of saving in retirement accounts," author Derek Messacar wrote in his report released Monday.

"Employer sponsorship and other forms of automatic saving may, therefore, matter a great deal in helping more vulnerable groups save for their retirement."

The report found that for workers earning near the Canadian average, a $1 automatic increase in registered pension plan contributions resulted in an average reduction in registered retirement savings plan contributions of 55 cents.

But for workers who did not save much in an RRSP, the $1 automatic increase in registered pension contributions increased net savings by about 95 cents.

Meanwhile, for workers who save regularly for retirement, the $1 automatic increase was largely offset by a similar reduction in RRSP contributions.

The Statistics Canada report looked at personal income tax data from 1991 to 2010 to see if increases in registered pension plans increased retirement savings or redirected savings that would have been made elsewhere.

However researchers were unable to assess how an automatic increase in registered pension contributions affected other forms of savings due to data limitations.

Saving for retirement and whether Canadians are putting aside enough has been a key policy discussion in recent years.

During the recent federal election campaign, the Liberals promised they would work to enhance the Canada Pension Plan, however just what that would look like is unclear.

Several provinces have raised concerns about the cost and what that could mean for the economy.

Ontario is moving ahead with its own pension plan that will be phased in starting in 2017 for companies that don't offer a pension plan. Critics of the plan have said it will increase the cost of hiring workers and hurt job creation.



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