60 per cent of pension plan members report barriers to retirement saving
New research from Benefits Canada magazine shows that even folks who are in retirement plans say they’re finding barriers to saving – all thanks to the impacts from the pandemic.
The magazine’s annual CAP (capital accumulation plan) Member Survey was carried during the start of the crisis, from March 30 to April 1.
A capital accumulation plan is any type of savings vehicle where members put in money – sometimes matched by the employer – over their working lives. At the end of work, the total amount saved for retirement is then either paid out to them via an annuity, drawn down from a special locked-in RRIF, or a combination of both.
The folks at Benefits Canada asked people in these types of plans how the pandemic was affecting their spending and saving habits.
The research found that Canadians “are continuing to juggle their financial priorities. More than half (54 per cent) of CAP members are prioritizing day-to-day expenses, followed by paying the mortgage or rent (47 per cent), paying off personal debt (38 per cent), enhancing personal savings (34 per cent) and saving for retirement (28 per cent),” the magazine reports.
A fairly low number of respondents – 41 per cent – “described their current financial situation as excellent or very good,” the magazine notes. A further 40 per cent said their finances were “adequate,” but 19 per cent said things were “somewhat poor or very poor.” A whopping 60 per cent said “they’re unable to save as much as they’d like for retirement due to other financial debts, such as credit cards or student loans,” Benefits Canada reports.
Debt is definitely a barrier to saving, the magazine reports. “I think the big thing we need to start to get across to workers, savers, Canadians . . . is that having too much credit card debt is the opposite side of insufficient retirement savings,” Joe Nunes, executive chairman of Actuarial Solutions Inc., states in the article. “It comes from too much spending. We have to get better at educating people that they need to keep the spending in check to get the savings in order.”
The problem, however, is that the pandemic is making Canadian household debt even worse.
“You don’t need to be a psychic to predict that over the next weeks and months, the country will see an increase in personal bankruptcies, while household debt is going to soar,” reports Maclean’s magazine. “Well before COVID-19, there was growing concern over the country’s personal finances, with debt-to-income ratios topping 176 per cent in the third quarter of 2019, which means for that every dollar of income we earn we owe $1.76.”
With so many people off work and receiving CERB benefits, which may equal only about half of what they were making at work, credit cards and lines of credit will feel the strain, the magazine predicts.
Let’s face it – at a time when just staying healthy and avoiding COVID-19 is the new national priority, followed by keeping a roof overhead and food in the fridge, retirement saving is going to get bumped to the bottom of most people’s to-do lists.
But remember that with some capital accumulation plans, like your RRSP or your Saskatchewan Pension Plan account, you can reduce your contributions and put in what you can. If you can’t chip in what you did last year, put in less. Any contribution, however small today, will benefit you in the future, thanks to the professional investment growth it will receive over the years. You can ramp things up again when better times return.
|Written by Martin Biefer
|Martin Biefer is Senior Pension Writer at Avery & Kerr Communications in Nepean, Ontario. A veteran reporter, editor and pension communicator, he’s now a freelancer. Interests include golf, line dancing, classic rock, and darts. You can follow him on Twitter – his handle is @AveryKerr22|