HOOPP and Abacus Data's 2022 Canadian Retirement Survey
Home affordability and rising interest rates are threatening retirement security for young adults
Economic factors like rising inflation and interest rates are threatening Canadians’ retirement security, according to the 2022 Canadian Retirement Survey from Healthcare of Ontario Pension Plan (HOOPP) and Abacus Data. The outlook is particularly troubling for those under the age of 35, whose barriers to home ownership and savings capacity — both of which have a strong impact on retirement security — are increasingly challenged by these economic conditions.
In the survey of 1,716 Canadian adults, 55% said they were concerned about having enough in retirement, which was up six points from last year. Other top concerns impacting retirement security were the day-to-day cost of living (66%), which was up 11 points, “income keeping up with inflation” (62%) and “housing affordability” (56%).
“Retirement and savings concerns have been high every year we’ve done the Canadian Retirement Survey, and now they’re being exacerbated by rising interest rates and inflation,” said Steven McCormick, SVP, Plan Operations, HOOPP. “Well over half of Canadians expect these factors to cause financial challenges and force them to retire later. At the same time, funding retirement through the sale of a home is becoming a less viable strategy for many individuals. It raises the question of whether Canada’s younger generations are headed for a perfect storm on retirement security.”
Saving for retirement top priority — but a third have saved nothing
Saving for retirement is the number two priority amongst Canadians, with 53% citing it (affording the day to day was number one, at 62%), but many are struggling to accomplish it. Thirty-two per cent of working Canadians said they have yet to save anything for retirement, and 38% said they have saved nothing for retirement in the past year.
Nearly half of Canadian homeowners are planning to rely on the sale of a home to set themselves up for retirement (45%), but that plan is becoming increasingly risky in the current environment. In addition to the high levels of concern over current housing affordability, 58% of non-homeowners said they are worried about what interest rates will do to their ability to buy a home. And an equal number of homeowners are worried about others’ ability to buy their home as they approach retirement.
“The general outlook for retirement security in Canada is darkening,” said David Coletto, CEO of Abacus Data. “Seventy-five per cent of all Canadians agree there is an emerging retirement crisis in Canada and 72% feel that saving for retirement is prohibitively expensive — both up seven points over last year. And if current trends continue, it will be tougher for younger generations.”
While concerns are widespread across age groups, the situation is worse for Canadians aged 18 to 34. Compared to Canadians 35+, those in this younger group are less likely to own a home (47% vs. 67%) or have savings over $5,000 (54% vs. 61%). Seventy-five per cent of non-homeowners 18 to 34 are worried about the impact of interest rates on their ability to buy a home, and an equal proportion of homeowners in that age group are worried about their ability to afford current/future mortgage payments.
Better pensions needed — 82% agree
McCormick added: “Savings challenges are more acute for younger adults, but there is an agreement across generations that an important solution to the problem is better workplace retirement savings plans, and that everyone has a role to play on this front”:
- 82% of Canadians agreed that all workers should have access to a pension that guarantees a percentage of their working income in retirement. Sixty-six per cent are willing to pay for this access themselves by accepting a slightly lower salary in exchange for a better (or any) pension.
- 77% agreed that all employers should be required to contribute in some way towards pensions for all workers, and 74% agree governments could save money by supporting pensions that are more efficient.
- 83% agreed that without good pension plans at work, many Canadian seniors will experience poverty and 77% said workers without pensions will become a burden on the taxpayer.
“Previous HOOPP research with employers, as well as our own members, has confirmed that good workplace retirement savings plans reduce financial stress and elevate peace of mind for workers of all ages,” McCormick added. “And this in turn improves productivity for employers.”
These findings are based on a survey conducted online with 1,716 Canadians aged 18 and older from April 21 to 27, 2022. The margin of error for a comparable probability-based random sample of the same size is +/- 2.35%, 19 times out of 20. The data is weighted according to census data to ensure that the sample matches the Canadian population according to age, gender, educational attainment, and region. 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 620 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 420,000 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 and its members.
Abacus Data is an innovative, fast-growing public opinion and marketing research consultancy. They use the latest technology, sound science, and deep experience to generate top-flight research-based advice to clients. They offer global research capacity with a strong focus on customer service, attention to detail and exceptional value. Abacus is 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.
Earlier today, I had another great discussion with Steven McCormick, SVP, Plan Operations, HOOPP.
I will get to this discussion below but before I do, some more content going over the Executive Summary available here and below:
In the spring of 2022, the Healthcare of Ontario Pension Plan (HOOPP) commissioned Abacus Data to conduct its fourth Canadian Retirement Survey, an annual public opinion survey to capture the views of Canadians on the current economic climate, retirement preparedness, and personal and societal impacts of workplace pensions. Their responses suggest Canadian workers’ retirement security is threatened, particularly for those under 35 whose barriers to home ownership and saving capacity are exacerbated by current economic conditions. With reduced access to some of the retirement savings vehicles that were available to previous generations, such as home ownership, those under 35 see the value in having access to better workplace pension plans.
Canadians are growing increasingly concerned about day-to-day cost of living impacting their ability to save for retirement
Concern about day-to-day cost of living has grown significantly in the last year (+11 points) and is the leading concern among Canadians (66% very concerned). They expect rising interest rates and inflation will cause their day-to-day expenditures to become less affordable (88%) and impact their ability to save for retirement (85%).
While these financial pressures are widespread among Canadians, the situation for those under 35 years old is particularly troubling. The impact of these differences on younger Canadians signals a generational divide that is being compounded by economic conditions. (“Very concerned” means a rating of 7-9 on a scale of 1 to 9.)
- 32% of Canadians currently describe themselves as ‘falling behind’ (in terms of their standard of living), which grows to 47% if inflation continues to rise; 63% agree they will be forced to push out their retirement date if inflation continues to rise.
- Compared to Canadians over 35, those younger than 35 (18-34) are less likely to own a home (47% versus 67%) or have savings over $5,000 (54% versus 61%).
- 29% of Canadians under 35 say that if inflation continues rising, they will likely have more debt in the next six months; 83% agree they will be forced to push out their retirement date.
Capacity to save is reducing for working Canadians, especially for those under 35
Almost three quarters of Canadians (72%) say that saving for retirement is prohibitively expensive (+7 points since 2021). If inflation continues to rise, one third of Canadians will not have much money to save and one quarter will have no money to save.
Among working Canadians, one third have never set aside any money for retirement due in part to cost of living pressures.
- 38% of workers have not set aside any money for retirement in the last year and living paycheck to paycheck continues to be the top reason (42%).
- 35% of workers under 35 have never saved anything for retirement compared to 30% of workers over 35.
Inflation, housing affordability concerns for all Canadians, especially for those under 35
Over half of Canadians (56%) are concerned about housing affordability, with inflation adding further strain. Most non-homeowners are worried about what interest rates will do to their ability to buy a home (58%); an equal proportion of current homeowners are worried about what it will do to others’ ability to buy their home when they want to sell and help fund their retirement.
Furthermore, with high interest rates impacting younger Canadians’ ability to take on more debt and reduce their existing debt, they see home ownership as a less viable means for saving for retirement than previous generations.
For Canadians under 35:
- 63% are very concerned with housing affordability, at significantly higher levels than those aged 45 and older (54%).
- Only 47% own a home compared to 67% who are aged 35 and older.
- 75% are worried about the impact of interest rates on their ability to buy a home, with an equal proportion worried about their ability to afford current/future mortgage payments.
- 91% indicate that rising interest rates have a big impact on their ability to take on more debt with 88% also indicating that they have a big impact on their ability to reduce their existing debt.
- Only 39% say getting into the housing market early is considered an effective way to save for retirement.
Canadians recognize the personal value of pensions
Canadians of all generations recognize that a pension is a very effective vehicle to save for retirement and they're willing to pay for it despite financial strain; those with pensions feel better insulated from current and future economic conditions.
- 66% of Canadians would rather have a lower salary and a pension (or better pension) than a higher salary with no pension (or worse pension). While older Canadians who are closer to retirement are, predictably, more likely to take the pension over the salary, half of young workers under 35 still choose the pension over salary.
- Young workers understand the value of pensions. Among those under the age of 35, ‘finding a job with a defined benefit pension plan’ is considered the most effective way to save for retirement.
- 70% of Canadians without a pension say rising inflation will reduce their ability to save enough money compared to only 45% of those with a pension.
- 38% of Canadians without a pension say they are ‘falling behind’ while only 25% of those with a pension say the same.
Canadians recognize the societal value of pensions
As Canadians increasingly agree that there is an emerging retirement crisis (75%, +7 points since 2021), they continue to understand the societal benefits of pensions. The value of pensions is evident and is seen as a remedy to this developing crisis; however, the accessibility of pensions for many Canadians continues to be a challenge.
Only 13% of those without a workplace pension think it is likely they will receive a pension while 58% think it is unlikely they will ever get one.
Across age brackets, three quarters of Canadians agree that:
- Without good pensions in place, the economy will suffer (77%).
- If workers cannot access good workplace pensions and contribute during their working lives, they will become a burden on the taxpayer (77%).
- All employers should be required to contribute in some way towards pensions for all workers (77%).
- We have a moral obligation to ensure our children have pensions like their parents and grandparents had (76%).
Since 2019, HOOPP and Abacus Data have been conducting the Canadian Retirement Surveyand the retirement security picture for Canadians has remained bleak. In the latest survey, three quarters of Canadians (75%) believe a retirement income crisis is emerging (+7 points since 2021; stable since 2019). This crisis will disproportionately impact those younger Canadians as housing affordability concerns and costs of saving for retirement are intensified by interest rates and inflation.
Against this backdrop, Canadians across all generations recognize one solution is better workplace pensions. They see pensions as a more affordable and efficient way to save for retirement and are even willing to trade part of their current pay to access one. They also see how employers and governments benefit from offering workplace pensions because of the positive impact they have on businesses and the economy.
These findings are based on a survey conducted online with 1,716 Canadians aged 18 and older from April 21 to 27, 2022. The margin of error for a comparable probability-based random sample of the same size is +/- 2.35%, 19 times out of 20. The data is weighted according to census data to ensure that the sample matches the Canadian population according to age, gender, educational attainment, and region.
The full presentation has a lot more material and charts but the main points are conveyed above.
Some Thoughts on this Survey
I've long warned about Canadian retirement angst and I think the advent of soaring inflation and much higher rates is only adding to this widespread angst many Canadians legitimately feel.
The former Governor of the Bank of Canada, Stephen Poloz, wrote a terrific book, The Next Age of Uncertainty: How the World Can Adapt to a Riskier Future:
The economic ground is shifting beneath our feet. The world is becoming more volatile, and people are understandably worried about their financial futures. In this urgent and accessible guide to the crises and opportunities that lie ahead, economist and former Governor of the Bank of Canada Stephen Poloz maps out the powerful tectonic forces that are shaping our future, and the ideas that will allow us to master them.
These forces include an aging workforce, mounting debt, and rising income inequality. Technological advances, too, are adding to the pressure, putting people out of work, and climate change is forcing a transition to a lower-carbon economy. It is no surprise that people are feeling uncertain.
The implications of these tectonic tensions will cascade throughout every dimension of our lives—the job market, the housing market, the investment climate, as well as government and central bank policy, and the role of the corporation within society. The pandemic has added momentum to many of them.
Poloz skillfully argues that past crises, from the Victorian Depression in the late 1800s to the more recent downturn in 2008, give a hint of what is in store for us in the decades ahead. Unlike the purely destructive power of earthquakes, the upheaval that is sure to come in the decades ahead will offer unexpected opportunities for renewal and growth.
Filled with takeaways for employers, investors, and policymakers, as well as families discussing jobs and mortgage renewals around the kitchen table, The Next Age of Uncertainty is an indispensable guide for those navigating the fault lines of the risky world ahead.
I worked with Stephen Poloz years ago at BCA Research and think very highly of him.
If I were to write a book, I'd write about the Age of Retirement Insecurity, arguing forcefully that Canadian policymakers need to stop dithering and do more to properly cover millions of working Canadians who have no workplace pension whatsoever.
Here is the big irony in Canada, we literally have some of the best defined-benefit pensions in the world, if not THE best, but sadly we are not covering enough Canadians so our retirement system doesn't score among the best in the world because of our lack of coverage.
No doubt, there are incremental changes happening, enhanced CPP being an important one for future generations, but it's not enough and it won't help older workers.
There are also great initiatives like CAAT DBplus and OPTrust Select, offering cost-effective retirement solutions for employers-employees all over the country (CAAT DBplus) or in Ontario's non-profit sector (OPTrust Select).
They are incredible retirement solution programs which are growing their membership but the reality is we need to accelerate and replicate their success to cover a lot more Canadians desperately looking for a safe pension they can count on.
The world is changing fast, as bubbles in tech and other risk assets pop, it's the younger generation that risks falling further and further behind.
But this report also highlights another big problem, namely, how far too many Canadians have relied on increasing housing prices as their de facto retirement savings program.
As inflation concerns become more ingrained and mortgage rates rise, it introduces a lot more uncertainty in this retirement strategy.
One CEO of a major Canadian pension fund told me recently he's very worried about the lack of diversification in the retirement savings of Canadians and told me flat out: "If we see a protracted downturn in housing, a lot of Canadians which are way overexposed are going to be in big trouble."
He's absolutely right but what concerns me more is even if Canadians were managing to save more and properly diversify their investments across housing and public stocks and bonds, we'd still be staring at a looming retirement crisis.
We simply cannot ask people to be their own retirement stewards, it's a recipe for disaster.
What else? Economists like talking about productivity gains as being the only true source of economic wealth.
They're right but very few make the linkage between economic security and productivity gains.
In October, I covered HOOPP's 2021 Canadian Employer Survey, showing that employers that offer retirement savings benefits report higher levels of employee productivity over the past year and have greater optimism for the future.
It makes a lot of sense but truth is too many employers only see workplace pensions from a cost angle, not taking a long-term perspective for what is in their and employees' best interest, as well as what is in the best long-term interest of the country.
In Canada, we have a great healthcare and education system but we need to do a lot more to bolster our retirement system.
We also need to help people with disabilities as far too many of them are living in poverty, barely able to survive in an inflationary environment.
The same goes for seniors on fixed income, many of them are finding it difficult to make ends meet.
I can't overemphasize how lucky members at HOOPP are and the same goes for all Canadians that have a defined-benefit pension which is well managed in their best interest.
Discussion With Steven McCormick, SVP, Plan Operations, HOOPP
Alright, that was a long preamble to my discussion with Steven McCormick, SVP, Plan Operations, HOOPP.
Please forgive me, pension policy is an issue I take to heart and think we all need to think about it carefully if we want to see this country thrive for generations to come.
I want to thank Steven for taking the time to talk to me earlier and also thank Jackie Emick for sending me embargoed material beforehand and thank James Geuzebroek for attending the Teams meeting this morning.
I'm going to go over the important parts of our discussion.
I began by telling Steven I'm really worried about the looming retirement crisis and glad they're shedding important light on this issue.
Thank you for taking an interest to share this story because I think it's very real. I think it's very, very important that as a society -- governments, businesses and individuals -- we start paying attention to what we would say is a perfect storm coming ahead for retirement future.
I told him I agree and was glad to see this year's survey expanded on topics like inflation and housing affordability.
Steven then gave me the main points of this survey:
Three things that strike for me right off when I look at the survey. We've been running this survey for four years, concerns have been high every year, but it has been exacerbated by the rise in inflation and interest rates. That comes through loud and clear. It's interesting and we spoke about this last year, in many quarters people have been talking about the increase in savings during the pandemic. I question whether that was true for all of society. This year's survey comes out and says that for 32% of respondents, their standard of living has fallen behind. 63% of them say they will have to push out their retirement date if this inflation continues. That number jumped to over 80% for younger Canadians. I think that is a very important finding in here.
The other part is and this is a message that needs to be heard by all is Canadians do see the value and the need for retirement. In spite of all these pressures on day to day living, 66% of respondents would rather have a lower salary or forgo some salary in order to have a pension or a better pension. I think that's incredible, very consistent with last year's result with 70%. Despite all of the challenges, people still see a need for retirement.
Underlying all of the data, we see a bigger divide. For younger generations, it's much more bleak, when you look at heir prospects for day to day living, prospects for retirement, let alone home ownership, they report lower expectations for the future. I think that is the perfect storm that is coming and has been messaged fro many years through this survey.
Those are the high level points I think people want to take when going through this survey.
If you read the survey carefully, there's no question younger Canadians are falling behind, finding it much more difficult to save and see their retirement prospects as bleak.
Now, I did tell Steven that for very young Canadians in their 20s, enhanced CPP will figure more prominently into their retirement income and that's definitely a very good thing but I'm not sure it will be enough to solidify their retirement. If a retirement crisis materializes, there will be a cost for society and that cost will be borne by Canadian taxpayers as the survey states.
I think it is positive that a very modest improvement in CPP will help at the margin. Canadians should look at it but it was a very modest increase in CPP. For those falling behind, it may keep them from not falling behind quite as far. While it is a positive, I'm not sure it's going to stall the retirement crisis Canadians are reporting through this survey. So I think it is very positive that they improved the CPP, I would be cautious in terms of thinking it will resolve the retirement crisis, It will not solve the issue but provide some support at the margin.
Again, I think enhanced CPP is great for younger Canadians starting to work but I agree, it will not stall the retirement crisis.
I then asked Steven straight out why does HOOPP do so much advocacy in terms of pensions, highlighting important issues on the Canadian retirement landscape when it doesn't impact its members directly? Steven responded:
Our mission is to deliver on the pension promise. When you speak to any HOOPP employee, you'll see the pension promise is our guiding principle and something we focus on every day. Bringing up this kind of research on the benefits of good pensions helps that mission, it is consistent with that mission. We have a responsibility of raising that awareness on why good pensions like HOOPP are valuable for the economy, for Canadian society. We believe and our members believe that all Canadians benefit when there is good retirement security. They're in the healthcare business, helping people with retirements, it aligns very well and they know the value of a good pension. We feel strongly it is important and aligned with our mission that that availability comes across all sectors of society.Steven told me HOOPP is ready, willing and able to help drive the conversation in public policy on this issue and he stressed coming out of the pandemic with everyone looking to build back better, there is a strong possibility of having more meaningful conversations on these issues with many stakeholders (labor, businesses, governments, etc.). "Hopefully this could be part of the discussion to get that going."
He also told me HOOPP continues to add members, they added another 25 to 30 workplaces last year across the public and private health sphere.
He lauded CAAT and OPTrust for expanding access to pensions across Ontario and the country. "These are the types of activities and plan strategies we need to see more of."
I took a step back and told Steven that longer term, what worries me is how the retirement crisis will impact the overall economy and that there is a lot more uncertainty now with heightened economic and geopolitical risks.
He told me HOOPP's investment professionals are always thinking of these issues and the plan is fully funded and in good shape to meet any challenges that lie ahead. "We have the advantage to have a very long-term focus and not be swayed by emotions and short-term thinking that impacts many individuals."
He said research they did on the value of a good pension showed individuals would need to save $900,000 more in order to fund an equivalent type of retirement and that's just not feasible for most Canadians:
The opportunity to participate in a collective retirement plan will benefit people and we demonstrated it whether that be a group RRSP plan to a DC plan to a large collectively funded plan to a Canada model. Each one makes it progressively better. I think this is a particularly challenging time for individuals to make those type of choices. I can speak on behalf of our investment professionals, they can take some comfort knowing that they participate in a Canada model pension on their personal side as they take care of pension investments for or members (HOOPP employees can participate in their plan).
Steven said he worked in the financial industry back in 2008 and saw how it negatively impacted many retail investors. "I understood the emotions that drove their decisions and in hindsight you can say they should have taken a long view but that's not always easy to do when you have a small nest egg you're relying on to retire."
Again, the biggest benefits of a DB plan is it pools investment and longevity risks and lowers costs, so individuals never have to worry that they'll outlive their savings.
Steven ended off by encouraging all employers to look at the positive accelerator a retirement plan of any type could provide to their existing workforce for attracting and retaining talent:
Retirement savings can be a very efficient compensation tool because of the multiple effect that can come from that down the road. There is an opportunity for society to provide some peace of mind today that a good retirement is possible and affordable. It is possible if we do something.
I thank Steven McCormick for another enlightening conversation and applaud HOOPP for doing their part in advocating for better retirement outcomes for all Canadians, not just their members.
Please share this post with your elected representatives, we need to get the message out and we need to help shape public policy so it benefits all Canadians over the long run.
And earlier today, CPP Investments' President and CEO John Graham sat down with Rita Trichur for a discussion about the Fund’s most recent results of a 10-year net return of 10.8%, its long-term investment approach and how it hones its global competitiveness.
Great discussion, take the time to watch it and know this, Canada has the best pensions in the world but we need to increase coverage to all Canadians. Enhanced CPP is important but I'm looking to see more pension solutions to address the growing retirement needs of all our citizens.
Please note I will be back next week and wish all Quebecers une bonne Fête Nationale!