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“Contrary to popular claims of widespread gaps in Canadians’ retirement preparedness, a closer analysis of the impact of fourth-pillar assets show fewer Canadians at risk than previously thought..."

September 27, 2016 – Fourth-pillar assets significantly improve the outlook for Canadian households’ retirement readiness, according to a new report from the C.D. Howe Institute. In “The Bigger Picture: How the Fourth Pillar Impacts Retirement Preparedness,” authors Jeremy Kronick and Alexandre Laurin provide a comprehensive assessment of fourth-pillar assets in Canada.

“Contrary to popular claims of widespread gaps in Canadians’ retirement preparedness, a closer analysis of the impact of fourth-pillar assets show fewer Canadians at risk than previously thought,” commented Laurin.

By way of overview, Canadian households can count on four pillars of wealth in retirement:

  1. Government payments through the Old Age Security (OAS)/Guaranteed Income Supplement (GIS), which provides a basic income for all retirees;
  2. Benefits from the Quebec/Canada Pension Plan (Q/CPP);
  3. Wealth explicitly set aside for the purpose of supporting retirement, such as workplace pension plans; and
  4. Wealth from sources such as real estate, financial instruments, businesses, inheritances, insurance and tax-free savings accounts.

The authors focus on the group generally thought to be most at risk of inadequate retirement savings: employed 35-to-64-year-old Canadian households that primarily rely on voluntary savings to sustain their living standards.

After factoring in wealth already accumulated from all fourth-pillar assets, the authors find that 40 percent of this group has potentially already accumulated sufficient wealth to sustain themselves in retirement. This means that a sizeable proportion of households targeted by policymakers as most at risk of retirement income insufficiency are in fact already in good financial shape.

In total, this leaves about one-in-five employed 35-to-64-year-old households, most of them in the upper-income quintiles, likely needing to accumulate more retirement capital on a voluntary basis outside of workplace pension arrangements.

Kronick concludes: “It is crucial policymakers pay close attention to the role of fourth-pillar assets in determining the retirement readiness of Canadians. Failure to do so would be a significant oversight.”

Click here for the full report. 

The C.D. Howe Institute is an independent not-for-profit research institute whose mission is to raise living standards by fostering economically sound public policies. Widely considered to be Canada's most influential think tank, the Institute is a trusted source of essential policy intelligence, distinguished by research that is nonpartisan, evidence-based and subject to definitive expert review.

For more information contact: Jeremy Kronick, Senior Policy Analyst and Alexandre Laurin, Director of Research, C.D. Howe Institute: 416-865-1904 or email: kmurphy@cdhowe.org.