HOOPP's 2021 Canadian Retirement Survey

New research from HOOPP and Abacus Data released today show two of three Canadians have saved nothing for retirement during COVID, retirement tops list of worries:

Most Canadians have not set aside anything for retirement in the past year (63%) which is up 5% since last year, according to the third annual Canadian Retirement Survey from Healthcare of Ontario Pension Plan (HOOPP) and Abacus Data. The survey also found a widespread belief that better access to workplace pensions is needed to avoid a retirement crisis.

The findings, based on an April 2021 survey of 2,500 Canadians, affirm there is a high level of anxiety among Canadians about their ability to save for retirement. Half (48%) said they are “very concerned” about not having enough money in retirement. This was more than concern for one’s own physical health (44%), mental health (40%), debt load (31%) and job security (26%). (Retirement was the second greatest concern, after daily cost of living.)

“After more than a year of COVID-19, Canadians remain steadfast in their personal and societal concerns around retirement security,” said Steven McCormick, SVP, Plan Operations, HOOPP. “As day-to-day financial pressures mount for some and ease for others, Canadians across the board are acutely aware of the importance, and challenge, of saving for retirement.”

Almost half (46%) of Canadians said they’ve saved more money during COVID than they otherwise would have. However, of these, half (52%) set aside nothing for retirement during the past year. Of those who said they saved less than usual, 72% saved nothing for retirement.

The COVID-19 pandemic harmed the finances of half of Canadians (52%) and did so disproportionately amongst the younger and lower-income groups. Canadians aged 44 and younger are twice as likely to have had their finances greatly harmed (24%) than Canadians 60+ (11%). Likewise, Canadians earning less than $50k are twice as likely to have had their finances greatly harmed (25%) than those earning $100k+ (12%).

“The pandemic has exacerbated the divide between those who can save for retirement and those who can’t,” said Abacus Data Chief Executive, David Coletto. “Those who are the least likely to save – younger and lower-income Canadians – were the hardest hit by the health crisis. This year’s results also show widespread agreement that employers can play an important role in making saving for retirement more affordable.”

Regardless of one’s current finances or the impact of COVID, there are widespread and consistent concerns about having enough money for retirement. Of those making $50K or less, 52% said they were very concerned; and even amongst those making more than $100K, a full 42% said they were very concerned. When asked why they hadn’t saved for retirement, the most common response was living paycheque to paycheque, with one in three (36%) identifying with this reality.

This year’s results once again confirm that Canadians continue to think long-term and big picture on retirement issues. Two-thirds (67%) agree there is an emerging retirement crisis and 65% said that saving for retirement is prohibitively expensive.

For the third straight year, Canadians also widely recognize that workplace pensions are key to the solution:

• 71% are willing to forgo a higher salary for a (better) pension plan (74% last year)
• A strong majority say that all workers should have access to affordable (85%) and efficient (84%) retirement savings arrangements (85% and 86% respectively last year)
• 77% say employers have a responsibility to offer a pension plan (76% last year)
• 75% agree that without good pensions in place, the economy will suffer; and 74% said that, in the absence of good workplace pensions, individuals will become a burden on taxpayers (77% and 76% respectively last year)

“These findings, consistent with prior years, point to a clear desire amongst Canadians for greater access to workplace pensions,” said McCormick. “As business leaders and decision-makers plan for our post-COVID ‘new normal,’ it’s clear that Canadians would strongly support improvements to retirement security for everyone.”

He added: “HOOPP is proud to do its part by providing retirement security to healthcare workers, many of whom fall into groups that often don’t have access to pensions, such as women, part-time workers and younger Canadians. For our membership, the impacts of this pandemic will continue to be felt even after we emerge from the immediate crisis; but they can take some comfort in knowing their pension is secure.”

The survey was conducted between April 19 and 27, 2021. The margin of error is + / - 1.96, 19 times out of 20. See more detailed results here.

About the Healthcare of Ontario Pension Plan

HOOPP serves Ontario’s hospital and community-based healthcare sector, with more than 610 participating employers. Its membership includes nurses, medical technicians, food services staff, housekeeping staff, and many others who provide valued healthcare services. In total, HOOPP has more than 400,000 active, deferred and retired members.

HOOPP operates as a private independent trust, and is governed by a Board of Trustees with a sole fiduciary duty to deliver the pension promise. The Board is jointly governed by the Ontario Hospital Association (OHA) and four unions: the Ontario Nurses’ Association (ONA), the Canadian Union of Public Employees (CUPE), the Ontario Public Service Employees' Union (OPSEU), and the Service Employees International Union (SEIU). This governance model provides representation from both management and workers in support of the long-term interests of the Plan.

About Abacus

Abacus Data is an innovative, fast-growing public opinion and marketing research consultancy. We use the latest technology, sound science, and deep experience to generate top-flight research-based advice to our clients. We offer global research capacity with a strong focus on customer service, attention to detail and exceptional value. We are the only research and strategy firm that helps organizations respond to the disruptive risks and opportunities in a world where demographics and technology are changing more quickly than ever. To learn more visit: abacusdata.ca

Take the time to read the executive summary of the 2021 Canadian Retirement Survey here as well as the full survey here.

Earlier today, I had a chance to talk with Steven McCormick, SVP, Plan Operations, HOOPP and we went over the latest survey and the findings. 

I thank Steven for taking some time to talk with me and thank James Geuzebroek, Senior Manager, Media and Public Affairs, for setting the conference call up.

I've covered this survey in the past and this is the third year where HOOPP commissioned it.

I also spoke to Steven about retirement security last September when HOOPP published research showing that amid the financial hit of COVID-19, three out of four Canadians would choose greater retirement security over more money now. 

What is interesting in this year's survey done by Abacus Data is to gauge whether or not the pandemic has changed people's mind about retirement security, and as you will see, along with health and debt loads, retirement security still ranks right up there as a pressing concern. 

Steven began by warning us to beware of averages.

What he meant was the headlines are full of stories on how people have saved a bundle during the pandemic, but this gives a very misleading picture of what is going on. For example, the survey found about half of Canadians are worse off because of the pandemic, and that the pandemic has disproportionately hurt those who were already vulnerable.

"Younger, lower income Canadians were disproportionately impacted through their jobs and livelihood and they are having a very hard time saving for retirement."

But everyone is having a tough time saving for retirement:

Almost half (46%) of Canadians said they’ve saved more money during COVID than they otherwise would have. However, of these, half (52%) set aside nothing for retirement during the past year. Of those who said they saved less than usual, 72% saved nothing for retirement.

More worrisome, only 37% of Canadians managed to save anything for retirement in the last year, which is down 5 points since last year. 

Why aren't Canadians saving more? In short, and this is my opinion, everything costs more but wages are stagnant.

Also, as I told Steven, a lot of Canadians are taking out huge mortgage debt to buy homes and basically treating their house as their de facto retirement savings program.

In fact, home prices are up 30% from last year, so younger Canadians are taking on more mortgage debt and not diversifying their savings to invest properly for retirement. 

There is also a great divide between older homeowners and younger renters which is skewing the overall net worth of Canadians:

The pandemic real-estate boom has made some Canadians richer, while others languish.

The net worth of the nation’s households increased by about C$770 billion ($633 billion) in the first three months of 2021, a record 6% gain, to C$13.7 trillion, Statistics Canada said in a report Friday. Since the start of 2020, that figure has increased by more than C$2 trillion, largely thanks to rising home prices.

But the data also show that windfalls are going largely to homeowners and older Canadians. Households that own their home accounted for almost all of the gains in the first quarter -- C$730 billion. The wealth of renters was up just C$43 billion. That disparity also comes as rising home values make owning increasingly out of reach for many Canadians.

“The numbers speak to exacerbating wealth inequalities, because we also know that it is becoming even more difficult for renters to get into the housing market,” Jimmy Jean, chief economist at Desjardins Securities, said by email. “The financial burden of owning a property is now untenable for many.”

Household net worth spiked 21.5% in the first quarter from a year earlier, the largest gain in records to 1990. That’s more than triple the historical average of 6.8% yearly gains.

Those with a major earner 55 or older held C$1.1 million in net worth at the start of the year, versus C$260,000 for households whose primary breadwinner was under 35, the agency said.

What is driving the meteoric increase in housing prices? A few things:

• Historic low rates are driving demand and the pandemic only added fuel to the fire.
• Lack of supply because of government regulations and developers favoring condos over homes
• And a good old fashion housing bubble driven by flippers and other speculators.

All these factors don't help younger Canadians who were disproportionately impacted by the pandemic to save more for retirement.

In fact, it exacerbates wealth inequalities and allows older homeowners who have paid off their house to tap into equity to invest or spend on whatever they desire.

Why am I sharing this with you? Because I think it's important to understand the structural factors behind the survey results (again, these are my opinions).

You can't save for retirement when wages are stagnant and you're saving to buy a house where prices are soaring for all sorts of reasons.

Worse still, the younger generation is increasingly taking dumber risks in the stock market to try to make up for that savings shortfall, like taking advice from Reddit /Wall Street Bets to trade meme stocks.

Steven said this: "One thing is for sure, it highlights the need for better workplace pensions and there are enormous challenges to educate people on finances. We aren't just advocating for defined benefit pensions, but any workplace pension."

He's right, if we are to come out of the pandemic stronger, we need to address the growing retirement gap which is exacerbating inequality. 

This is especially true now that rates are at record lows and people are taking increasing risks to make up for the shortfall, abandoning the 60/40 portfolio altogether:

Latest Blow to 60/40 Model Is Exodus of Mom and Pop Pensions https://t.co/fBnVWHzKZ7 via @Yahoo

— Leo Kolivakis (@PensionPulse) June 16, 2021

Think about it this way, central banks have pumped trillions into the global financial system, all that liquidity benefits asset owners, most people who don't own stocks or a home are struggling to get by and save. These central bank policies have done nothing to increase their wealth.

I am sounding cynical but it's the truth, we are heading down a very dangerous path.

That's why I welcome this annual HOOPP commissioned survey, it gives us a snapshot of how Canadians are addressing their retirement concerns. 

Lastly, I did ask Steven if this survey is just about advocacy or will it lead to concrete policies.

He told me they want to raise awareness among governments and employers to address a growing retirement gap. "Make it easier to save, have automatic withdrawals, make it more efficient, more portable, have it managed professionally, basically what we laid out in the value of a good pension."

I couldn't agree more, nobody is really talking about the growing retirement crisis but my fear is that with each passing year, it's getting a lot worse. 

The conclusion of the survey reminds us of this:

• After more than a year of the COVID-19 pandemic and its associated restrictions, Canadians remain steadfast in their personal and societal concerns around retirement security. As day-to-day financial pressures mount, Canadians are not taking their eye off the importance of retirement savings. 
• While the negative financial impacts of the pandemic have hit the most vulnerable groups (who are also the least prepared for retirement) the hardest, Canadians across all income levels strongly agree and support improvements to retirement affordability for all. Even those who have been able to save more during this period are cautious in their use of those funds, mostly holding it in reserve. As Canada slowly begins to pivot into economic recovery, Canadians believe it makes economic sense to ensure retirement affordability for everyone.

When it comes to retirement security, all Canadians deserve better, not just the lucky few who have access to a well-governed defined-benefit plan. 

Please take the time to read the executive summary of the 2021 Canadian Retirement Survey here as well as the full survey here. Also, read all about the value of a good pension.

You already know my thoughts, in order to prosper as a country, we need to provide three pillars: affordable healthcare and education for all and retirement security so every Canadian can retire in dignity and security. We've done wonders with the two first pillars, a lot more work needs to get done for the third pillar.

Below, an older clip (2019) where HOOPP's former CEO, Jim Keohane, explains to a plan member what HOOPP is doing to help more Canadians achieve retirement security. 

I'd say when it comes to advocating for retirement security, HOOPP is leading the pack and I hope to see a more unified front from Canada's large pensions so we can adopt better policies in this country to achieve a lot better retirement outcomes. 

We are nowhere near where we should be on this front and it's a shame because we have the very best pension fund managers in the world but are falling short from providing equal access to these pensions to all Canadians.