Canadians Need to Prioritize Pension Plans as Responsibility Shifts, Banks Say: Canadians Need to Prioritize Pensions
Freeman, Sunny, The Canadian Press
TORONTO - As pensions come under increased pressure from corporate and public sector cost-cutting, Canadians need to place a higher priority on saving for retirement, says a new report from the Bank of Montreal.
Demographic and other social shifts, such as an aging population, a more mobile workforce and an off-loading of corporate pension plans have left Canadians with a growing need to be attentive to their own savings, Tina Di Vito, head of the BMO Retirement Institute, said Tuesday.
"The onus is really on the individual now to take charge of their retirement," she said.
There is growing concern that future generations won't be able to maintain their standard of living in their retirement years, partly because savings rates are historically low, investment returns are waning and life expectancies are increasing.
The dwindling number of defined benefit pension plans means more retirees don't have a guaranteed level of retirement income. And only one-third of Canadians now have company-sponsored pension programs, down from 41 per cent in 1991.
The shift in pension responsibility comes as low interest rates and uncertain market returns make it too risky for employers to guarantee retirement incomes, Di Vito said.
Earlier reports have suggested companies that offer defined benefit pensions may face rising costs this year as a result of lower returns on investments and rock bottom interest rates, which increase liabilities for plans.
At the same time, Canadians are not placing a high priority on a good retirement plan, instead tending to focus on salary and flexible work arrangements, the report says.
While it "makes sense" that younger Canadians focus on current income rather than a period far in the future, "it's surprising that at this point in time, even older Canadians are thinking the same thing," Di Vito said.
However, too many Canadians believe their employer plan, the Canada Pension Plan and Old Age Security will cover their retirement, at a time when both employer plans and the OAS are under threat from cost-cutting.
The BMO report suggests that more than half of those surveyed could not identify the "must-have features" they would include if they were able to design their own workplace pension plan. …