With the RRSP deadline looming, many Canadians turn their attention to saving for retirement with an emphasis on accessing goals they may have set for their future.
While there are numerous studies indicating that Canadians aren't saving enough for retirement coupled with tendencies for many to shy away from pursuing greater financial literacy, Statistics Canada reports that in 2011, registered pension plans (RPPs) rose slightly while pension coverage dipped. Pension coverage rates decreased 0.4% to 38.4% in 2011 compared to 38.8% in 2010.
Looking closer at this report, RPP membership is up 0.8% (49,000 members) from the same period a year earlier. Specifically, public sector pension plans rose 0.6% while private sector plans rose 1% comparably. Public sector pension plans still hold the leading spot with 52% (3.1 million members) of total RPP membership. In the private sector, RPP coverage remains around three million active members although coverage has declined from 28% to 24%.
What about the type of plan? Not surprisingly, membership in Defined Benefit (DB) plans is down 0.1% from 2010. As for Defined Contribution (DC) plans, membership saw an increase of 3.5% compared to the same period a year earlier. A fact sheet from the Office of the Chief Actuary reports that the shift away from DB plans continues with a decline to 73% in 2011 from 83% from 2001. The main outliner remains in the public sector where Defined Benefit coverage remains stable at 94% membership.
Increasingly, women continue to join RPPs with an rise in 2011 of 0.8% over 2010. Women represent 49% of total membership versus men at 50.1%. As participation in RPPs slowly increases for women, men no longer account for membership percentages in the 75% range like they did in early 1970s.
The focus on the importance of saving for retirement continues as plan sponsors seek ways to engage their plan members through education sessions, print and online awareness mechanisms.
For additional tips and resources to help drive up pension plan participation, please contact us. We're here to help so that you can focus on what you do best.
With the deadline for Registered Retirement Savings Plan (RRSP) contributions for the 2013 tax year directly ahead of us on March 3, 2014, it is timely to consider both the value of an RRSP and Tax Free Savings Account (TFSA).
RRSPs took the main stage back in 1957 when they were first introduced by the Canadian government. It wasn't until January 1, 2009 when TFSAs were established.
According to Statistics Canada, less than one in three eligible Canadian tax-filers contribute to an RRSP. A similar situation presents itself with TFSAs. According to an ING Direct Survey, 53 percent of Canadians haven't opened a tax-free savings account (TFSA) because they feel they don't have the money to open one. The survey results also indicate that 42 percent of Canadians aren't planning to open a TFSA in 2014.
A survey by BMO Bank of Montreal indicated that there are more Canadians in 2013 (48 percent) who opened a TFSA than in 2012 (39 percent). TFSAs experience higher adoption rates in British Columbia, Alberta and the Prairies (all over 50 percent) whereas comparatively, the weakest adoption rates are in Atlantic Canada (34 percent). Canadians primarily open TFSAs as a vehicle to help them save for retirement as well as a source of funds for emergency situations.
According to the latest BMO study, more Canadians have an RRSP at 67 percent than have a TFSA at 39 percent.
The ING Direct Survey found that 31 percent of Canadians agreed that they don't understand the value of a TFSA or are familiar with the rules. The BMO survey cited that only 19 percent of respondents knew the contribution limit was $5,500 and only 11 percent identified all six types of eligible investments within a TFSA.
The value of a TFSA includes not paying tax on the earnings in the account as well as its flexibility -- there are no penalties for withdrawing money. Canadians who open a TFSA also have the ability to carry over unused contributions.
Knowing about TFSAs and how they are taxed is important. Understanding contribution thresholds help to avoid over contributing and any complications that come with a lack of awareness of the specific TFSA rules.
If you are looking for ways to engage employees about the benefits and features of a TSFA or an RRSP as a savings tool, please contact us. We're hear to help so that you can focus on what you do best.
According to a 2011 report by Human Resources and Skills Development Canada, there are approximately 5 million Canadians aged 65 or older. This number is set to increase to 10.4 million by 2036. For a variety of reasons including harsh financial realities, many seniors will need to remain in the workforce for some time.
What does a benefit plan look like for this age group? Do these "seniors" change the group benefits landscape? Increasingly, employers will be faced with this challenge as they continue to want to offer value for their employees while still keeping a close eye on the costs of their group plan. As employees age, plans experience increases in usage and costs due to age-related health degradation. Another factor to consider as employees age involves termination provisions. Will provisions stay the same or will they need to change based on the needs of an aging workforce?
Employers benefit from understanding their current workforce. The reality is that the Canadian employee landscape finds itself dotted with a mix of four different generations. From Traditionalists (born before 1946) to Generation Y (born after 1980), employers seek to find the right benefit offering to meet the changing needs of their employee base. While Generation X (born after 1964) and Generation Y may be focused more on core health and dental coverage to ensure they have some financial support for braces, etc., employees at the other end of the age spectrum may be interested in other and perhaps more non-traditional benefits such as end-of-life planning services.
The question goes beyond the basic understanding of basis demographic components such as age, sex and family status. Contributing factors relating to the issues impacting employee benefits programs include culture, diversity, and health. Employee needs and expectations vary by age band and demographic grouping. What an employee over age 62 wants from a group plan may vary significantly from the interests of a 25 year old employee.
Another important consideration involves how demographics contribute to what, when, and how employers communicate messages about benefit plans. The way Generation Y employees wish to receive information about their benefits plan may differ significantly from the manner in which a Baby Boomer (born after 1946) wants to access the same information. Generation Y is known as the Digital Generation. They are tech savvy and they leverage social media well whereas many Boomers still prefer face-to-face presentations to learn about programs and benefit offerings.
Finally, employers also benefit from factoring in the cultural element of their workforce. In our multicultural society, our diversity makes us stronger, but it also creates a variety of expectations about the value offered by existing benefits plans. A one-size-fits-all plan finds itself stressed to meet the varying needs of increasingly diverse workforces.
No matter how we look at it, employee workforce demographics play a big role in the design, communication, and value perception of benefit plans. Employers who review and adapt to the changing needs of their workforce will continue to attract and retain talent. For more information about effective ways to achieve the best mix of plans for the specifics of your employee population, please contact us. Our team has the skill and the experience to design benefits packages that will assist in attracting and retaining talent while managing costs well at the same time. We're here to help so you can focus on what you do best.
Dave Dickinson, B.Comm, CFP, CLU, CHFC
Experienced Benefits Specialist ready to optimize your group benefits and pension plans.