The Canadian Retirement Landscape

In previous blog posts, we’ve discussed retirement payment options available to you as a member of an employer sponsored retirement plan. Your plan is one of the tools available to help you prepare for retirement. Overall, there are three levels of retirement plans available in Canada: government sponsored public plans, privately sponsored employer plans and individual plans.

The first level of the system is the foundation, which consists of government plans. These include Old Age Security (OAS) and the Canada/Quebec Pension Plans (C/QPP). They are designed to cover the widest selection of individuals and help provide the basic needs for retired Canadians.

The second level of the system includes privately sponsored employment plans, which consist of defined benefit pension plans, defined contribution pension plans, group registered retirement savings plans (RRSP) and deferred profit sharing plans. Group retirement plans are a great benefit, as they offer professionally managed funds, sophisticated planning tools and low fees. However, it is not mandatory for employers to offer a retirement plan to employees. In fact only a third of Canadians belong to an employer sponsored pension plan.

The final level consists of personal savings, including registered plans such as RRSPs and assets held outside of registered plans (cash, stocks, bonds, real estate and mutual funds).

The employer sponsored and personal plans are important because government plans are designed to provide only basic income levels. It is your private pension and savings that determine the type of lifestyle you will be able to afford when you retire.

Governments have recognized this and encourage savings in these plans. They do this through tax refunds on deposits into registered plans and through the tax free growth of interest, dividends and capital gains inside your registered plans.

If you are interested in learning more about what level of income you can expect when you retire, please log in to your plan record keepers website. They have free tools available to help, or speak with your financial planner.