BMO Financial Group

BMO Financial Group

January 30, 2014 06:03 ET

BMO RRSP Study: Eighty-nine Per Cent of Canadians Plan to Rely on the CPP/QPP to Fund their Retirement

- Almost one-third of respondents plan to rely 'heavily' on the CPP/QPP, despite the fact that the average CPP payout is less than $600 a month

- Eighty-eight per cent will look to personal savings, including RRSPs, to play a role in covering the costs of retirement

- Thirty-four per cent are hoping to win the lottery to come up with the money they need for their retirement years

TORONTO, ONTARIO--(Marketwired - Jan. 30, 2014) - According to BMO Financial Group's most recent Registered Retirement Savings Plan (RRSP) study, almost 90 per cent of Canadians plan to rely on the Canada Pension Plan/Quebec Pension Plan (CPP/QPP) to cover costs during their golden years. Further, almost one-third (31 per cent) reported that they plan to rely "heavily" on the CPP/QPP, despite the fact that the average monthly CPP payout is less than $600.

"Given the amount that the CPP or QPP pays out, Canadians should not rely on them as a primary source of income to fund their retirement," said Chris Buttigieg, Senior Manager, Wealth Planning Strategy, BMO Financial Group. "Rather, they should consider the CPP and QPP to be a supplementary component of their overall retirement income solution and focus on creating their very own 'personal pension plan' by contributing to an RRSP on a regular basis."

Mr. Buttigieg added that, even for those who can count on a workplace pension to help fund their retirement, the landscape is changing: "Not only are there fewer of us covered by workplace pensions, but there's also a shift happening from defined benefit plans - which specifies the fixed pension amount an employee will receive upon retirement - to a defined contribution model where retirement income depends on how much is saved and how the contributions are invested. In a defined contribution plan, there's no guarantee of the amount you will receive in retirement."

He noted that, even if someone is part of a workplace defined contribution plan, such a person still needs to ensure that contributions are invested according to his or her risk tolerance, time horizon, and retirement objectives. "Given that there are no guarantees with a defined contribution pension plan, it makes sense to diversify your retirement nest egg and identify and build up other sources of retirement income as well."

How Else Will Canadians Fund Their Retirement?

The study also identified the sources of income Canadians plan to use to fund their retirement outside of the CPP/QPP:

  • Personal savings such as RRSPs, TFSAs, etc. (88 per cent)
  • Part-time job (59 per cent)
  • Sale of home/property (49 per cent)
  • Inheritance (40 per cent)
  • Hoping to win the lottery (34 per cent, including 14 per cent relying "heavily")
  • Support from family/children (28 per cent)

"To those hoping to win the lottery to fund their retirement, the odds of actually winning are approximately 1 in 14 million. A much better bet would be to develop a personal retirement savings and investing plan and to start contributing as early and as often as possible to your RRSP," concluded Mr. Buttigieg.

Regional Breakdown:

Region % who are relying on the CPP/QPP to fund their retirement % who are relying on their personal savings to fund their retirement % who are relying on winning the lottery to fund their retirement
National 89 88 34
Atlantic 84 81 32
Quebec 94 85 36
Ontario 87 89 33
Prairies 88 95 29
Alberta 92 92 32
B.C. 86 92 41

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The survey was conducted by Pollara with an online sample of 1,003 Canadians 18 years of age and over, between November 18th and 22nd, 2013.

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