Between 1993 and 2001, the number of taxfilers who made premature withdrawals from their RRSP increased at more than three times the pace of those who contributed, according a new study released today by Statistics Canada.

The study found that while two-thirds of Canadian taxfilers aged 20 to 59 contributed to an RRSP at least once during the 1990s, more than one-quarter also made at least one withdrawal.

Overall, the number of people contributing to RRSPs increased by more than 25% between 1993 and 2001. During the same period, the number withdrawing funds from their plans rose 84%.

The withdrawals exclude funds removed from RRSPs through the Home Buyers Plan and the Lifelong Learning Plan.

In 2001, about 5.7 million taxfilers in this study contributed to an RRSP, while just over one million withdrew funds. Contributions by these people in 2001 amounted to just over $24 billion, and withdrawals to about $4.4 billion.

In addition, taxfilers withdrew smaller amounts during this nine-year period. In 2001, the median was only $1,600, down 46% from 1993, meaning that half of withdrawals were higher than $1,600 and half lower. In comparison, the median contribution rose 11% to $2,600.

The study looked at circumstances that might lead people to draw on their RRSP savings. Among those studied, the death of a spouse had the biggest impact on RRSP withdrawals. People who lost a spouse were far more likely to withdraw funds, and they withdraw large amounts, $10,000 or more.

A second factor was the involuntary loss of a job, or starting a new business. Involuntary job loss did not have an appreciable impact on the likelihood of making a withdrawal, while starting a business was a slightly bigger factor. However, both were associated with large withdrawals.

Older individuals more commonly withdrew larger amounts, which may not be surprising given that they would have accumulated more in their RRSP, StatsCan said.

“What is striking for taxfilers aged 50 to 59 was the amounts they withdrew. In 2001, nearly one-fifth of taxfilers aged 50 to 59 who removed funds from their RRSPs took out $10,000 or more. This was at a time in their lives when returning money to an RRSP could prove difficult. And in fact, people in this age group were less likely to repay these withdrawals,” it reports.

Overall, by the end of 2001, less than 40% had repaid the money they had withdrawn to their RRSP, the study found.

The study also found evidence that people use RRSPs to smooth their income over the years. Taxfilers who made frequent withdrawals continued to contribute, even more often than others. Over half of those who made three or more withdrawals also contributed in at least five years through the nine-year period.