The head of one of the country’s largest pension plans is a skeptic on the matter of whether people will save enough for retirement all on their own.
“My level of confidence is zero,” said Jim Keohane, president and CEO of the Healthcare of Ontario Pension Plan, or HOOPP. “Life gets in the way of saving.”
That’s kind of bad news because people can barely afford life these days – how will saving for retirement ever fit in? HOOPP is hoping to generate some discussion about this question by releasing the results of a survey about retirement on Tuesday.
The poll results validate the personal-finance theme of the federal election campaign so far, but also highlight a deficiency in all the talk about families struggling to get ahead. People are nearly as worried about the state of their retirement savings as they are about the affordability of everyday life.
Three-quarters of the 2,500 poll participants said they were concerned to some degree about having enough money in retirement, while 82 per cent said they worried about the cost of living. Concern about both issues ranked well ahead of taxes, physical and mental health, personal debt and government.
As part of their focus on helping people get ahead, federal parties have promised to cut cellphone bills, help first-time home buyers, lower taxes and give parents and seniors more money in government benefits. Retirees have rated some attention, but retirement itself has hardly been talked about.
Tax cuts and benefit increases are easy to explain and understand, and they speak directly to the feeling of falling behind financially as a result of living costs rising faster than incomes. You can also argue that they address retirement worries by helping people find more money for their registered retirement savings plans and tax-free savings accounts.
The HOOPP poll suggests people instinctively know that this money won’t trickle down to their retirement savings. Asked whether they’d take a slightly lower salary in return for a work pension plan (or an improved work pension plan), 76 per cent went for the pension.
As a defined benefit pension plan that pays its members benefits for life based on their earnings while in the work force, HOOPP has a particular position on how people can best save for retirement. You can sum this view up as more pensions, please, and preferably defined benefit plans.
The latest Statistics Canada numbers on pensions show that 37.1 per cent of workers were covered by a registered pension plan in 2017, down from 37.5 per cent in the previous year. In the HOOPP survey, 44 per cent of participants were in a pension.
HOOPP thinks politicians at all levels could be more creative and open-minded in figuring out ways to adapt the defined benefit pension model in ways that would make it attractive for employers. DB pensions are slowly fading because employers don’t want to carry the financial obligations.
Mr. Keohane said pensions, with their forced saving, professional management and low costs compared with retail investment products, are a more efficient way for people to save for retirement. “One of the best ways you can put more money in people’s pockets is by making their savings more efficient,” he said.
In the HOOPP poll, it’s clear that people who don’t have pensions struggle to put money away for their retirement. Of those who said they didn’t have a workplace pension, 49 per cent had not saved at all for retirement.
Superficially, it sounds like giving people more money through tax cuts and higher benefits would address this shortfall. But as Mr. Keohane said, life gets in the way of carving out part of your paycheque for saving.
This leads us back to pensions, a strong remedy for financial anxiety that hasn’t been talked about at all in an election campaign mostly about money.
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