Retirement plan awareness

René Morissette and Xuelin Zhang,
Business and Labour Market Analysis
Perspectives on Labour and Income,
Volume 5, No. 1, Statistics Canada Catalogue No. 75-001-XIE

Context

During the mid-1990s, Canadian employers were thought to be moving from defined-benefit registered pension plans (RPPs) towards defined-contribution arrangements, particularly group RRSPs. While the previous research showed the death of defined-benefit plans to be greatly exaggerated, the growing popularity of group RRSPs presents employees with a greater variety of employer-sponsored retirement plans than in the past. But, can all employees make the distinction between RPPs and group RRSPs? More importantly, how many think they have at least one of the two but, in fact, have neither?

Objective

The goal of this study is to examine how well full-time permanent employees in the private sector understood their coverage in an employer-sponsored retirement plan in 2001.

Findings

Many workers do not clearly understand their retirement plan coverage and, in particular, confuse RPPs and group RRSPs. Of those who reported having a group RRSP at their job, one in four worked in firms that did not offer one. Among those who reported having an RPP, one in six were in firms without one.

Low seniority explains why young workers appear less informed about their retirement plans than their older counterparts. Almost 20% of employees with less than two years seniority who reported having a retirement plan worked for firms reporting none. The corresponding proportion is at most 7% among employees with 10 or more years seniority.

University graduates, unionized workers, workers in large establishments, and those employed in finance and insurance, and communication and other utilities appear to be better informed than other workers.

Overall, 4% of full-time permanent employees in the private sector thought they had a retirement plan but didn't. Lack of understanding is more acute among recent immigrants. Their rate was 9%, twice as high as Canadian-born workers.

Data source: The Workplace and Employee Survey, 2001.