Pension plans in Canada

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After only a modest gain in 2005, membership in employer registered pension plans resumed normal growth in 2006, entirely the result of increases among women.

Canada's 18,594 employer sponsored registered pension plans added 77,700 new members in 2006, representing a growth of 1.4%, according to new data from an annual census of these plans. This took total membership to 5.8 million in 2006.

In 2005, these plans, also known as registered pension plans (RPPs), added only about 20,000 people, a pace of growth that was substantially slower than annual gains recorded since the turn of the millennium.

Gains in 2006 were distributed evenly between the public sector, which added 39,400 members, and the private sector, which added 38,300, despite the fact that the public sector only accounts for less than 10% of all registered pension plans. Most levels of government in the public sector added members during the period.

However, the growth in the membership of these plans has still been far slower than the rate of growth of paid workers as measured by Statistics Canada's Labour Force Survey. Consequently, there has been a continuous decline of the proportion of paid workers with a registered pension plan.

In 2006, 38.1% of paid workers had a registered pension plans, down marginally from 38.5% in 2005. During this period, coverage for women increased, while membership of men declined.

Gains come from women

The gain in membership in registered pension plans during 2006 came from women. Membership rose by about 82,200 among women, but it fell by about 4,500 among men, for a net gain of 77,700.

Of the 5.8 million total membership, women accounted for 2.8 million, or 48.5%, while men accounted for 3.0 million, or 51.5%. In 2000, women accounted for 45.1%, and men, 54.9%

Increases for women were shared between the public and private sectors.

For the first time, the proportion of women members with "defined benefit plans" exceeded the share of men. The vast majority of RPP members belong to these plans, which are RPPs that define the benefits to be paid according to a formula stipulated in the plan text.

In 2006, 83% of women had a defined benefit plan, compared with 77% for men. This can be explained by the fact that most members in the public sector have a defined benefit plan and the proportion of women working in the public sector is higher than men.

Gains mainly from combination plans

For a second year, membership of defined benefit pension plans declined slightly. However, these plans still remain the main type of plan, with nearly 80% of all memberships.

Gains in membership came mainly from combination plans which added just over 88,000 members in 2006. Combination plans have both defined benefit and defined contribution components.

Defined contribution pension plans also contributed to the growth, with an increase of 6,100 members.

The under-funding of defined benefit pension plans since the beginning of 2000 may be an important factor explaining the increase in combination plans. To reduce their future financial obligation, a number of employers have added a defined contribution component to their existing defined benefit plans.

The proportion of plans under-funded during the period dropped considerably from 57% in 2005 to 45% in 2006.

The market value of assets (for both active members and retirees) in employer pension plans amounted to nearly $1.1 trillion in 2006.

Major membership gains in British Columbia and Alberta

British Columbia experienced the largest increase in membership in 2006, with a gain of 27,000, followed by Alberta, where membership was up by 25,600.

In 2006, membership in British Columbia totalled 675,000, below the peak of 689,000 reached in 2000. Membership in Alberta continued its upward trend, which started almost 10 year ago, peaking at 562,000 in 2006.

Since 2000, membership in Alberta has increased by just over 100,000. The strong performance of Alberta's economy over the last few years has been an important factor contributing to the growth in membership. However, the number of paid workers grew faster than pension plan membership.

Membership was up by 20,650 in Ontario and by 19,800 in Quebec.

Contributions on the rise

In 2006, total employee and employer contributions to RPPs climbed by $6.4 billion, or 17.1%, to a record high $43.8 billion.

Following low returns on investment early in 2000, employers continued to inject money into defined benefit pension plans to ensure adequate financing. Employer contributions accounted for 72% of the total, up from 70% in 2005. Increases mainly came from special payments for unfunded liabilities and solvency deficiencies, which increased by 44% to $10.9 billion.

Available on CANSIM: tables 280-0008 to 280-0027.

Definitions, data sources and methods: survey number 2609.

To obtain statistical tables providing key information or custom tabulations (74C0002, various prices), or to enquire about the concepts, methods or data quality of this release, contact Client Services (toll-free 1-888-297-7355; 613-951-7355; fax: 613-951-3012; income@statcan.gc.ca), Income Statistics Division.