Financial reserves in Canada’s three principal retirement programs have doubled since 1990 and now represent one of the largest pools of investment capital in the country, Statistics Canada reports.

StatsCan says reserves in registered pension plans, RRSPs, and CPP/QPP totalled more than $1.3 trillion at the end of 2003. This amount has doubled since 1990, taking inflation into account, StatsCan says.

Employer-sponsored registered pension plans accounted for the biggest chunk of assets, about 63%, RRSPs represent another 30%. The remaining 6% were held in the CPP/QPP.

“Pension funds are heavily invested in stocks and equity investment funds. As a result, changes in stock prices on Canadian and other stock exchanges have a direct impact on the value of pension fund assets,” it notes. “Shaky market conditions in the first years of the new century have had an impact on the financial reserves of the funds. By the end of 2003, the assets held in both employer pension plans and RRSPs were struggling to regain the levels achieved in 2000, again taking inflation into account.”

“The assets of the CPP/QPP, on the other hand, were 35% higher in 2003 than in 2000. Concerns in the late 1990s about declining balances in these funds led to a change in investment strategy for the CPP. This, combined with subsequent increases in contribution rates for both plans, has greatly changed the picture for these plans,” it says.

The government agency also notes that the percentage of taxfilers who saved is stable, but the amount saved has increased. In 2004, 7.9 million taxfilers aged 25 to 64, or 50% of the total, saved through either RPPs or RRSPs. The other half of taxfilers did not save through either program. Although the percentage of taxfilers who saved grew very little from 1992 to 2004, the annual savings of these people was up 37% (adjusting for inflation) to $50.8 billion in 2004.

By the end of this period, almost as much was being contributed to RRSPs as was saved in RPPs. This represents a significant change from 1992, when RRSP contributions were much lower (almost 23%) than the amount saved in RPPs.

As of Jan. 1, 2004, there were nearly 14,800 active registered pension plans in Canada, covering nearly 5.6 million members. The percentage of paid workers covered by an RPP stood at 45% in 1991, little changed from the coverage rate of 46% some 14 years earlier. Since then, however, the rate fell steadily to 39% in 2003.

Since 1977, the RPP coverage rate for the private sector has been steadily decreasing, from 35% in 1977 to about 27% in 2003. In the public sector, the coverage rate has always been much higher. In 2003, over 86% of workers in that sector were covered by an RPP.

At the end of 2003, total annual contributions to RPPs stood at $29 billion, up 36% from 2001. This increase, the largest on record, is due to a 52% jump in employer contributions. Employee contributions increased only 9%. Employer contributions rose sharply because many plan managers had to increase contributions, or resume them after a “contribution holiday,” to avoid or at least reduce unfunded liabilities. Prior to 2003, employer contributions (adjusting for inflation) had generally been decreasing since 1993.

About 5.6 million people, or 38% of all eligible taxfilers aged 25 to 64, made normal contributions to RRSPs in 2004, totaling $25.2 billion. The proportion was up slightly from 36% in 1992. Between 1992 and 2004, the biggest increase in the number of contributors to RRSPs occurred in older age groups. The average contribution was also highest for the older age groups.

The total RRSP room available to taxfilers aged 25 to 64 reached $367.3 billion in 2004, 4.5 times higher than it was in 1992, taking inflation into account. The share of room used has continued to drop, from 20% in 1992 to 7% in 2004. The bulk of the unused room is held by low-income taxfilers, who may not be in a financial position to contribute.

Although taxfilers aged 25 to 64 contributed over $25 billion to RRSPs in 2004, they also withdrew significant amounts that year. Over 1.4 million Canadians, or 9% of all taxfilers, received about $7 billion in RRSP income, an average of $4,905 per person. This average is, however, down significantly from $6,918 in 1994. This RRSP income was mainly in the form of withdrawals. Although it also includes annuities, they are less common among persons under 65.

@page_break@Nearly 1.4 million RRSP holders aged 25 to 64 cashed in all or part of their RRSP savings under the Home Buyers Plan, to at least partially finance the purchase or building of a home. Close to 9% of taxfilers in this age group took advantage of this program in 2004, withdrawing in total $14.2 billion.

The Lifelong Learning Plan was introduced in 1999. The latest statistics indicate that it is still not heavily used. In 2004, less than half a percent of taxfilers aged 25 to 64 withdrew money under the LLP. These 49,000 individuals withdrew more than $363 million from their RRSP to finance full-time education or training.