Thriving Without an RPP

Canadians aren't counting on pension coverage.

February 24, 2010

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The pension debate is front and centre in Ottawa, in the provincial capitals, in union households and in associations for the retired. Little wonder, considering the rapid decline of defined benefit pension plan coverage, and the spectacular bankruptcies of companies like Nortel leaving existing pensioners stranded with potentially reduced pensions.

Still, it seems like 2003 all over again: market losses based on an expected risk premium that, ultimately, failed to deliver on expectations. How much do Canadians rely on these expectations? Less so than the headlines might lead one to believe. In research drawn on by the Mintz Report (Summary Report on Retirement Income Adequacy Research) http://www.fin.gc.ca/activty/pubs/pension/riar-narr-eng.asp StatsCan researchers Yuri Ostrovsky and Grant Schellenberg find indications that seniors without pension plans have higher retirement incomes.

http://www.statcan.gc.ca/pub/11f0019m/2009321/part-partie1-eng.htm

Men aged 70 to 72: Market income received in 2006 as a percent of average annual earnings in 1989 to 1991, by Registered Pension Plan (RPP) status.

Ostrovsky and Schellenberg note: While individuals who did not have RPP coverage received less income from pensions and superannuations at age 70 to 72 than did individuals with coverage, this difference was offset by income received from other market sources, most notably interest, investments, and dividends, and capital gains.”

Of course, there’s a wrinkle here: “Overall, the vast majority of RPP members (90% or more) were retired by 2003, while RPP non-members were more likely to defer retirement to later years and older ages.”  Whether that is by choice or necessity, the researchers can’t answer.

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