Low income growth increasing retirement savings deficit in B.C.
Canadian banks and credit unions will have just over a month until the March 1 contribution deadline to get Canadians to contribute to their registered retirement savings plans (RRSPs). But the reminders and alerts might be increasingly for naught.
According to Canadian Revenue Agency data compiled by Statistics Canada, fewer Canadians, and British Columbians in particular, have been contributing to their RRSPs each year.
In 2010, less than a quarter of Canadian tax filers put some money into their RRSPs, down from 29% in 2000.
The drop has been more pronounced in B.C., where only 23% contributed to their retirement savings in Vancouver’s Olympic year, down from nearly 30% a decade earlier.
Having funds to save has remained a key stress point for households. A BMO survey released in early January found 60% of Canadians thinking of contributing to an RRSP worry about where the money will come from.
For more than a decade, families have found it increasingly difficult to save. Between 2000 and 2010, while average family incomes have risen more than 14%, the cost of living has jumped 21% in B.C. The challenge has been more acute in Metro Vancouver, where incomes grew 13% and the cost of living rose 21%.
Unless savings trends reverse, RRSPs could continue to lose importance as a meaningful government program to help Canadians save for retirement.
Statistics Canada data shows that fewer taxpayers are taking full advantage of their RRSPs.
By 2010 nearly 86% of B.C. taxpayers had unused contribution room, up from 75% in 2000. And the total amount of unused RRSP room has more than doubled to $82.5 billion from $31.2 billion.
If Canadians had managed to put aside the 18% of their annual income allowed in an RRSP, the country might not be facing its long-term retirement crisis, especially for post-baby-boomer generations.
In recent years, the federal government has tried to entice more Canadians to save with new savings plans, but questions persist if those will produce a meaningful improvement on the retirement savings prospects for Canadians.
More on this next week.