Income Inequality and Pensions

http://www.statcan.ca/english/research/11F0019MIE/11F0019MIE2006286.pdf

This study, “Pension Coverage and Retirement Savings of Canadian Families, 1986 to 2003”, released by StatsCan today, highlights increased inequality of retirement savings at the family level. Unsurprisingly given increased inequality of both earnings and wealth, the top quintile of families are accumulating more retirement savings than was the case in the mid 1980s, while those at the bottom are not. As noted, the maturation of the C/QPP had an important equalizing effect on the incomes of current retiree households, but this trend is likely to shift into reverse as today’s workers retire unless policy actions are taken.

This paper also contains interesting new data on pension coverage at the individual level from tax filer data. Currently, just 21.1% of men aged 25 to 34 (28.3% of women) and 32.8% of men aged 35 to 54 (38.1% of women) contribute to a Registered Pension Plan. These figures are lower than the more widely cited data on pension coverage of jobs partly because soem 15% of the labour force are self-employed.

All in all, this should be another prompt to thinking about how to improve our public pension plans to avert an increasingly gloomy future for retirees.