"It is a crisis. It is a crisis that is confronting us and if we don't deal with it now then we will be in trouble down the road."
— Ontario Liberal Leader
The Ontario Retirement Pension Plan is a showpiece of the Liberals' re-election campaign platform. The proposal calls for a mandatory program in which workers contribute 1.9 per cent of their annual income (up to
So, is there a retirement-savings crisis?
Spoiler alert: The Canadian
This one earns a rating of some baloney. Here's why.
First, let's take a quick look at the proposed Ontario Retirement Pension Plan. The 2014 Ontario budget estimates the contributions from workers and employers would be about
A worker with an annual salary of
If Canada Pension Plan payments are included, that person would receive combined benefits of up to
Next, let's look at retirement savings in
The Oxford English dictionary defines a crisis as "a time of intense difficulty or danger" and "a time when a difficult or important decision must be made."
Is that the case here? Let's consider Statistics Canada poverty data.
Poverty among the elderly has dropped sharply since the mid-1970s. Statistics
The low-income measure fell to a low of 3.7 per cent in 1995. It rose to 11.5 per cent in 2009, the last year for which Statistics Canada data are available.
The drop in the number of seniors living in poverty has widely been attributed to the introduction of the Canada Pension Plan and Quebec Pension Plan in 1966 (full pensions were not available until a decade later), along with Old Age Security and the Guaranteed Income Supplement.
So while the low-income measure has risen from the lows of the mid-1990s, fewer seniors are living in poverty today than they were in the 1970s, although the number seems to be on the rise again.
Using the poverty line to determine whether the current crop of seniors are in the middle of a retirement-savings crisis is perhaps a crude measure, but it offers at least one basic indication of the state of their finances.
Turning away from only seniors now, let's look at how Ontarians both young and old are saving for retirement.
That number fell steadily until it hit a historic low in 2005, when people were saving only 1.7 per cent of their disposable income. As of last year, Ontarians were putting 4.7 per cent of their extra cash into savings.
By that measure, it would seem that people are saving less money for retirement than they used to. Precisely how much is not certain, since the household savings rate does not specify if the money is being put away for retirement or for any other purposes.
What the experts say
So why has the savings rate fallen if people are putting more money into retirement savings plans?
Hamilton says it's because the savings rate treats all withdrawals from retirement savings plans — including all pensions paid from public-sector plans — as negative savings. So while Canadians are putting more aside for retirement, he says, they're also collecting more from retirement savings plans. The increased benefit payments have the effect of neutralizing the increased contributions.
Another factor to consider is the investment income earned on the plans themselves, Hamilton said.
"Now the investment returns on the accumulated savings are lower than they used to be," he said. "And that's the thing, more than anything else, that's dragging the savings rate down."
The household savings rate also doesn't factor in capital gains and losses, Hamilton added — so if interest rates go down and people shift their savings into stocks, none of the capital gains count.
He also agrees there's no retirement-savings crisis at the moment. That said, Ambachtsheer says he sees no harm in
Fewer and fewer private-sector workplaces are offering their employees pension plans, she notes. That leaves people with fewer options to save for their retirement.
"Then, the question becomes: how do people who have average skills in finances save for their own retirement?" Eng said.
The experts agree that there is no retirement-savings crisis — at least for now.
They acknowledge that no one really knows what the economy will look like in the future, and it's certainly possible another global downturn could wipe out people's retirement savings.
But at the moment, while people could always be saving more money, the experts say Ontarians don't find themselves in the middle of a crisis.
For this reason, Wynne's claim has some baloney.
The Baloney Meter is a project of
No baloney — the statement is completely accurate
A little baloney — the statement is mostly accurate but more information is required
Some baloney — the statement is partly accurate but important details are missing
A lot of baloney — the statement is mostly inaccurate but contains elements of truth
Full of baloney — the statement is completely inaccurate
Registered retirement savings plan contributions, 2012http://www.statcan.gc.ca/daily-quotidien/140325/dq140325b-eng.htm
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