Number of Canadians with Pension Plans Jumped by 300K. Are You?

Nearly 300,000 additional Canadians became members of registered pension plans (RPPs) in 2023, according to new data from Statistics Canada. This represents a significant increase in pension coverage and raises important questions about retirement security in a rapidly changing economic landscape. Is this growth sustainable? And, more importantly, are you adequately prepared for retirement?

The StatCan report reveals that the number of active RPP members rose by 4.2 per cent, bringing the total to approximately 7.2 million Canadians. This surge is particularly notable given the backdrop of economic uncertainty and evolving employment trends. A closer look at the data reveals key insights:

• Defined benefit plans remain popular, covering 4.9 million members.
• Defined contribution plans saw a 5.1% increase in membership.
• Women accounted for a slightly larger share of new members than men.
• Ontario and Quebec experienced the largest increases in RPP membership.

Defined benefit (DB) plans, where employers guarantee a specific pension payment upon retirement based on factors like salary and years of service, still dominate. However, defined contribution (DC) plans, where retirement income depends on investment performance and contributions, are also gaining traction. The rise of DC plans shifts more risk onto employees, making investment knowledge and planning skills crucial. Understanding the difference between these plans is fundamentle to securing your future.

One concerning point is that while pension enrolment increased, one province actually saw a decline. Manitoba experienced a decrease of 1,300 RPP members compared to the previous year, a worrying trend given the overall positive picture elsewhere. This highlights the uneven distribution of pension coverage across the country.

This increase in RPP membership outpaced overall employment growth. The Labour Force Survey indicates that employment grew by 3.8 per cent during the same period. So, what is driving this surge in pension enrolment?

Experts suggest several factors may be at play. Firstly, some employers are sweetening their benefits packages to attract and retain talent in a competitive job market. Secondly, increased awareness of the looming retirement crisis may be prompting more Canadians to prioritize pension savings. Finially, government policies promoting pension enrolment could also be having an impact.

“People are starting to realize that relying solely on government benefits like CPP and OAS isn’t enough to maintain their standard of living in retirement,” says Sarah Chen, a financial planner at Maple Leaf Financial in Toronto. “They’re actively seeking ways to supplement their income, and RPPs offer a structured and often employer-matched way to do that.”

The gender breakdown of new RPP members is also noteworthy. Women accounted for 150,700 of the new enrollees, exceeding the 142,800 new male members. While women’s share of active memberships remained steady at 51.3 per cent, this suggests a continued effort to bridge the gender gap in retirement savings. The increased enrolment is not a sign that the problem is solved, but it does represent a step in the right direction.

However, some remain skeptical about the long-term impact of this increase. “While the numbers are encouraging, we need to look deeper at the quality of these plans,” argues David Lee, an economist at the University of Calgary. “Are employers contributing adequately? Are employees making informed investment decisions in DC plans? Are plan administration fees eating into returns? These are critical questions that need answering.”

Across the country, the increase in RPP membership was geographically concentrated. Ontario led the way with 161,800 new members, followed by Quebec (54,800), British Columbia (32,000), and Alberta (18,700). This regional disparity underscores the need for targeted policies to promote pension coverage in areas where enrolment lags. The numbers from Ontario and Qubec are not surprising, as those two provinces are the most populous within the Canadian Federation.

For individuals not currently enrolled in an RPP, the question remains: what steps can be taken to ensure a secure retirement? Experts recommend several strategies:

1. Take advantage of employer-sponsored RRSP programs, especially if they offer matching contributions.
2. Consider opening a Tax-Free Savings Account (TFSA) and contributing regularly.
3. Seek professional financial advice to develop a personalized retirement plan.
4. Educate yourself about different investment options and risk tolerance.
5. Start saving early and consistently, even if it’s just a small amount each month.

The surge in pension enrolment is a positive sign, but it’s only one piece of the retirement security puzzle. “The shift was gradual, then sudden,” notes a user on X.com discussing the report. Individual responsibility, employer support, and sound government policies are all essential to ensuring that Canadians can enjoy a comfortable and dignified retirement. It is not enough to just cross your fingers and hope for the best.

The future of retirement is ever shifting and it’s more important than ever to take advantage of the resouces available to you.