RRSP contributions expected to continue declining through
2020: RBC Economics
Retiring boomers leading downward trend
TORONTO, January 11, 2010 As the aging
of the Canadian population progresses over the next decade,
RRSP contributions will likely continue to decline through
2020, according to an RBC Economics study based on RRSP contribution
trends in Canada over the past 40 years.
"For three decades starting in the late 1960s, RRSP
contributions grew steadily. Then they shifted downward in
the late 1990s and continued to fall through to 2008 as boomers
got older and contributed less," said Paul Ferley, assistant
chief economist, RBC. "This downward trend doesn't necessarily
mean Canadians aren't saving enough for retirement; but decreased
savings can negatively impact the overall Canadian economy
by making less funds available to finance investment activity."
The RBC report found that RRSP contributions, as a share
of personal income, have declined over the past 11 years after
steadily rising to a peak in 1997. The study concludes that
the boomer "bulge" and distinctive savings patterns
in each age group (34 and under, 35-44, 45-54 and 55 and over)
can explain the majority of both the growth in RRSP contributions
prior to 1997 and the drop off seen since.
The savings pattern for various age groups is quite distinct
with those aged 34 and under the least likely to make RRSP
contributions. The biggest increase in contributions occurs
when individuals move into the 35-44 age group followed by
a smaller rise going into the 45-55 age bracket. Contributions
start to move lower after age 55.
RRSP contributions over the past 40 years have risen and
fallen in step with the demographically significant boomer
generation moving through the decades until the late 1990s.
"The large number of aging boomers will likely be a key
factor in overall RRSP contributions continuing to drop over
the next 10 years barring any dramatic change in savings behaviour,"
"The age group with the biggest savings challenge is
the 35-54 age group," said Lee Anne Davies, head, Retirement
Strategies, RBC. "They're raising families, buying homes
and saving for children's education, but this time is also
critical for building a secure retirement future. We want
Canadians to be financially prepared for retirement and to
achieve their financial priorities, which is why having a
plan is important. Planning wisely can make it possible to
meet the many competing financial priorities while also saving
Ferley noted that several other factors affect RRSP contribution
- Personal income: During periods of economic slowdown and
weakening incomes, the pace of growth in RRSP contributions
- Health of equity markets: Individuals contribute more
to RRSPs when the TSX rises.
- Contribution limits: This impacts RRSP contribution levels
although the effect seems to be waning in recent years.
The complete RBC Economics RRSP study is available online
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Paul Ferley, RBC Economics, 416-974-7231
Matt Gierasimczuk, Media Relations, 416-974-2124