Savings Flexibility Key to Canadians

Canadians seem to be less concerned about the disappearance of defined-benefit pensions than the experts. According to a new report by BMO Retirement Institute, Canadians generally like the increased flexibility of capital-accumulation plans such as defined-contribution plans and group RRSPs.

Yet, the report, entitled Perfecting the Workplace Pension: The Quest Continues, points out: "Capital-accumulation plans do have a serious drawback: instead of having a guaranteed income, how much retirement income you can count on depends a lot on how much you have saved and how well you have invested.î

Certainly, the number of employer-sponsored pension plans has decreased. As the report states, only 33% of working Canadians are part of an employer-sponsored plan, down from 41% in 1991. Over the past 20 years, DB plans in particular have become scarce, with membership dropping to less than 16% of private sector workers from 31%. From 2008-2009 alone, membership in private sector DB plans declined nearly four percentage points. Public sector employees have fared better. More than 80% of public sector employees, but representing less than one-quarter of the workforce, still have DB pension coverage.

Yet, most Canadians seem unconcerned. BMO Retirement Institute asked Canadians aged 25 to 64 who are not yet retired to name the factor that was most important to them when they considered a job opportunity. Respondents across all age ranges placed a relatively low priority on a good retirement pension. Overall, only 7% of all respondents selected a good retirement pension as the most important factor. Salary (47%) and flexible work arrangements (22%) were considered far more important.

"Even as Canadians continue to be inundated in the media with dire warnings of a future retirement income shortfall,î says the report, "they are demonstrating a clear preference to maintaining control, whether over their current remuneration, work hours or work locations, as compared with the promise of a future benefit.î

For a copy of the report, go to www.bmo.com/retirementinstitute.