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Retirement Planning - Canada - August 2014

“The financial industry needs to go beyond projecting retirement dollar amounts and offer solutions that include effective decumulation strategies and more customized long-term insurance products that are aligned to government health care coverage.”
– Sanjay Sharma, Senior Financial Services Analyst

This report looks at the following areas:

  • Countering worry factors through more mass-marketed integrated retirement solutions
  • Boosting trust in banks and credit unions
  • Using simple messaging and investment strategies to boost engagement
  • Winning over the Chinese Canadian consumer

Canada’s population is aging, with significant growth in the over-65 population expected in the coming years. As a result, demand for retirement planning advice and insurance solutions will continue to increase. Although the life expectancy of Canadians continues to rise, the population is not necessarily getting healthier and this increased life expectancy is predicted to be accompanied by many older consumers dealing with serious illnesses such as hypertension and diabetes.

Two market values that can be used to estimate the size of the retirement planning market include a value of $1.3 trillion for Canadian employer-sponsored pension funds, and assets in TFSAs of $62 billion at the end of 2013.

This report covers the drivers of the retirement planning industry in Canada, exploring trends related to ownership, amount of savings, types of retirement planning activities, most trusted sources of advice and attitudes towards personal financial management.

The majority of this report covers the subject of private pension plans such as RRSPs and TFSAs (except for a short section on government retirement programs in Market Drivers).

Canada’s retirement system is funded by three pillars: Old Age Security/Guaranteed Income Supplement; Canada/Quebec Pension Plan and tax-advantaged non-government plans such as employer pension plans, RRSPs and TFSAs. Additionally, many Canadians have private non-registered savings, investments and insurance products.

Market size information includes employer pension plans, registered retirement savings accounts, tax free saving accounts, segregated funds and annuities. It does not include savings and investments in non-registered accounts.

The amount of retirement savings covered in the section on The Consumer – Amount of Retirement Savings includes employer pension plans.

 

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Table of contents

  1. Introduction

      • Definition
        • Excluded
          • Abbreviations
            • Glossary
              • Annuities
                • Atlantic Provinces
                  • Canada Pension Plan
                    • Decumulation
                      • Defined Contribution Pension Plan (DCPP)
                        • Defined Benefit Pension Plan (DBPP)
                          • Deferred Profit Sharing Plan (DPSP)
                            • Equities
                              • Guaranteed Income Supplement
                                • Housing starts
                                  • Locked-In Retirement Account (LIRA)
                                    • Non-Registered Investments
                                      • Old Age Security
                                        • Retirement target-date funds
                                          • Reverse Mortgage
                                            • Registered Retirement Income Fund (RRIF)
                                              • Registered Retirement Savings Plan (RRSP)
                                                • Segregated Funds (Seg. Funds)
                                                  • Tax Free Savings Account (TFSA)
                                                    • Term Life Insurance
                                                      • Universal Life Insurance
                                                        • Whole Life Insurance
                                                        • Executive Summary

                                                            • The market
                                                              • Market factors
                                                                • Canadian economy to pick up speed, but many risks remain
                                                                  • Population changes signal greater opportunity for retirement planning advice
                                                                    • Financial Strength of Canada’s Pension Plan & Old Age Security
                                                                      • Companies, brands and innovation
                                                                        • The consumer
                                                                          • Almost 80% of non-retired Canadians own a retirement savings product
                                                                            • Figure 1: Ownership of retirement savings products, June 2014
                                                                          • More than a quarter of Canadians fall into the mass affluent category
                                                                            • Banks are the most trusted source for retirement planning advice
                                                                              • Figure 2: Most trusted source of retirement advice, June 2014
                                                                            • Talking to a financial advisor is the most prevalent retirement planning activity
                                                                              • A third of Canadians state that they are comfortable with their debt
                                                                                • Longevity risk at the heart of retirement worry, particularly among women
                                                                                  • Figure 3: Attitudes towards retirement planning, June 2014
                                                                                • What we think
                                                                                • Issues in the Market

                                                                                    • Countering worry factors through more mass-marketed integrated retirement solutions
                                                                                      • The facts
                                                                                        • The implications
                                                                                          • Boosting trust in banks and credit unions
                                                                                            • The facts
                                                                                              • The implications
                                                                                                • Using simple messaging and investment strategies to boost engagement
                                                                                                  • The facts
                                                                                                    • The implications
                                                                                                      • Winning over the Chinese Canadian consumer
                                                                                                        • The facts
                                                                                                          • The implications
                                                                                                          • Trend Application

                                                                                                              • Trend: Help Me Help Myself
                                                                                                                • Trend: Edutainment
                                                                                                                  • Trend: Prepare for the Worst
                                                                                                                  • Market Drivers

                                                                                                                    • Key points
                                                                                                                      • Population count and growth in Canada
                                                                                                                          • Figure 4: Share of population of Canada, by territory/province, 2014
                                                                                                                          • Figure 5: Share of population in different age groups, by territory/province, 2013
                                                                                                                        • Canada’s population is expected to age in the coming years
                                                                                                                          • Figure 6: Population aged 65 years and over in Canada, historical and projected (per cent of total), 1971-2061
                                                                                                                          • Figure 7: Projected trends in the age structure of the Canada population, 2014-19
                                                                                                                        • Canada’s low rates of elderly poverty
                                                                                                                          • Increase in average retirement age
                                                                                                                            • Figure 8: Average retirement age in Canada, all retirees, 2009-13
                                                                                                                          • Overview of Canada’s Retirement Income System
                                                                                                                            • The Three Pillars of Retirement Income
                                                                                                                              • Financial Strength of Canada’s Pension Plan & Old Age Security
                                                                                                                                • Pooled Registered Pension Plan (PRPP)
                                                                                                                                  • Proposed Ontario Retirement Pension Plan (ORPP)
                                                                                                                                    • Canadian mutual fund fees
                                                                                                                                      • Decumulation and longevity risk
                                                                                                                                        • Economic overview
                                                                                                                                          • IMF says Canadian economy to pick up speed, but many risks remain
                                                                                                                                            • Figure 9: Canada’s GDP by quarter, 2008-14
                                                                                                                                            • Figure 10: Household disposable incomes and savings in Canada, 2008-14
                                                                                                                                          • Unemployment rates remain steady
                                                                                                                                            • Figure 11: Canada’s unemployment rate, 2008-14
                                                                                                                                          • Interest rates, inflation and market volatility
                                                                                                                                            • Figure 12: Inflation rates in Canada, 2004-14
                                                                                                                                          • Outlook on the real estate and housing market
                                                                                                                                              • Figure 13: Canada median net worth, by province, 2012
                                                                                                                                          • Strengths and Weaknesses

                                                                                                                                            • Strengths
                                                                                                                                              • Weaknesses
                                                                                                                                              • Who’s Innovating?

                                                                                                                                                • Key point
                                                                                                                                                  • National Bank’s Investment Track Retirement Planning App for iPad
                                                                                                                                                    • Sun Life’s Brighter Life website
                                                                                                                                                      • Desjardins
                                                                                                                                                        • CI Investments
                                                                                                                                                          • RBC Retirement Research Centre
                                                                                                                                                          • Market Size and Forecast

                                                                                                                                                            • Key points
                                                                                                                                                              • Canada Pension Plan (CPP)
                                                                                                                                                                • Employer-sponsored pension plans
                                                                                                                                                                  • Figure 14: Registered ownership plans in Canada, 2011-12
                                                                                                                                                                • RRSP
                                                                                                                                                                  • TFSA
                                                                                                                                                                    • Segregated (Seg.) Funds
                                                                                                                                                                    • Companies and Products

                                                                                                                                                                        • Bank of Montreal (BMO)
                                                                                                                                                                          • Overview and company information
                                                                                                                                                                            • Recent activity and innovation
                                                                                                                                                                              • Sun Life
                                                                                                                                                                                • Overview and company information
                                                                                                                                                                                  • Recent activity and innovation
                                                                                                                                                                                    • Fidelity Investments Canada
                                                                                                                                                                                      • Overview and company information
                                                                                                                                                                                        • Recent activity and innovation
                                                                                                                                                                                          • Dundee Goodman Private Wealth
                                                                                                                                                                                            • Overview and company information
                                                                                                                                                                                              • Recent activity and innovation
                                                                                                                                                                                                • Desjardins
                                                                                                                                                                                                  • Overview and company information
                                                                                                                                                                                                    • Recent activity and innovation
                                                                                                                                                                                                      • CI Financial
                                                                                                                                                                                                        • Overview and company information
                                                                                                                                                                                                          • Recent activity and innovation
                                                                                                                                                                                                            • Tangerine Bank (formerly ING Direct)
                                                                                                                                                                                                              • Overview and company information
                                                                                                                                                                                                                • Recent activity and innovation
                                                                                                                                                                                                                • Brand Communication and Promotion

                                                                                                                                                                                                                  • Key points
                                                                                                                                                                                                                    • ING (Tangerine) emerges as the most active direct mailer
                                                                                                                                                                                                                      • Figure 15: Direct mail acquisition volume (‘000) related to investments (August 2013-May 2014)
                                                                                                                                                                                                                    • Featured Campaigns from Mintel Comperemedia
                                                                                                                                                                                                                      • President’s Choice (PC) Financial
                                                                                                                                                                                                                        • ING Direct/(Tangerine Streetwise Portfolios)
                                                                                                                                                                                                                          • Insured Annuity from Scotia McLeod
                                                                                                                                                                                                                          • The Consumer – Ownership of Retirement Savings Accounts

                                                                                                                                                                                                                            • Key points
                                                                                                                                                                                                                              • Almost 80% of non-retired Canadians own a retirement savings product
                                                                                                                                                                                                                                • Figure 16: Ownership of retirement savings products, June 2014
                                                                                                                                                                                                                              • Product ownership peaks among over-55s
                                                                                                                                                                                                                                • Figure 17: Ownership of retirement savings products, by age, June 2014
                                                                                                                                                                                                                              • Lower ownership rates in the Atlantic Provinces
                                                                                                                                                                                                                                • Figure 18: Ownership of retirement savings products by region, June 2014
                                                                                                                                                                                                                              • Repertoire analysis
                                                                                                                                                                                                                                • Figure 19: Repertoire analysis, June 2014
                                                                                                                                                                                                                            • The Consumer – Amount of Retirement Savings

                                                                                                                                                                                                                              • Key points
                                                                                                                                                                                                                                • More than a quarter of Canadians fall into the mass affluent category
                                                                                                                                                                                                                                  • Figure 20: Amount of retirement savings, June 2014
                                                                                                                                                                                                                                • Men are more likely to invest higher amounts for retirement savings
                                                                                                                                                                                                                                  • Figure 21: Amount of retirement savings, by gender, June 2014
                                                                                                                                                                                                                              • The Consumer – Trust in Retirement Planning Advice

                                                                                                                                                                                                                                • Key points
                                                                                                                                                                                                                                  • Banks are the most trusted source for retirement planning advice
                                                                                                                                                                                                                                    • Figure 22: Most trusted source of retirement advice, June 2014
                                                                                                                                                                                                                                  • Trust in banks declines with age
                                                                                                                                                                                                                                    • Figure 23: Most trusted source of retirement planning advice, by age, June 2014
                                                                                                                                                                                                                                  • High-income earners prefer independent financial advice
                                                                                                                                                                                                                                    • Figure 24: Most trusted sources of financial advice, by income, June 2014
                                                                                                                                                                                                                                  • Credit unions and retirement planning
                                                                                                                                                                                                                                  • The Consumer – Retirement Planning Activities

                                                                                                                                                                                                                                    • Key points
                                                                                                                                                                                                                                      • Talking to a financial advisor is the most prevalent planning activity
                                                                                                                                                                                                                                        • Figure 25: Retirement planning activities performed, June 2014
                                                                                                                                                                                                                                      • Older Canadians are the most likely planners
                                                                                                                                                                                                                                        • More than a third of affluent Canadians have conducted estate planning
                                                                                                                                                                                                                                          • Figure 26: Retirement planning activities, by amount of investments, June 2014
                                                                                                                                                                                                                                      • The Consumer – Attitudes towards Money

                                                                                                                                                                                                                                        • Key points
                                                                                                                                                                                                                                          • A third of Canadians state that they are comfortable with their debt
                                                                                                                                                                                                                                            • Figure 27: Attitudes towards money, June 2014
                                                                                                                                                                                                                                          • Women are more risk-averse than men
                                                                                                                                                                                                                                            • Figure 28: Attitudes towards money, by gender, June 2014
                                                                                                                                                                                                                                        • The Consumer – Attitudes towards Retirement Planning

                                                                                                                                                                                                                                          • Key points
                                                                                                                                                                                                                                            • Summary of attitudes towards retirement planning
                                                                                                                                                                                                                                              • Figure 29: Attitudes towards retirement planning, June 2014
                                                                                                                                                                                                                                            • Longevity risk at the heart of retirement worry particularly among women
                                                                                                                                                                                                                                              • Figure 30: Worry-related attitudes towards retirement, June 2014
                                                                                                                                                                                                                                            • Only two in five Canadians feel they will be financially secure when they retire
                                                                                                                                                                                                                                              • Figure 31: Planning-related attitudes towards retirement, June 2014
                                                                                                                                                                                                                                            • Women are more likely than men to be overwhelmed by retirement investing
                                                                                                                                                                                                                                              • Figure 32: Retirement investing perspectives, by gender, July 2014
                                                                                                                                                                                                                                            • Widespread difficulties in saving for retirement
                                                                                                                                                                                                                                              • Figure 33: Attitudes towards the difficulties of retirement planning, June 2014
                                                                                                                                                                                                                                            • Young males most likely to procrastinate on saving for retirement
                                                                                                                                                                                                                                              • Figure 34: Procrastination-related attitudes towards retirement, June 2014
                                                                                                                                                                                                                                          • The Consumer – Retirement Planning and Chinese Canadians

                                                                                                                                                                                                                                            • Key points
                                                                                                                                                                                                                                              • Significantly high ownership rates of TFSAs among Chinese Canadians
                                                                                                                                                                                                                                                • Figure 35: Ownership of retirement accounts: Chinese Canadians against White/Caucasians, June 2014
                                                                                                                                                                                                                                              • Chinese Canadians are more likely to rate banks as their most trusted source for retirement planning advice
                                                                                                                                                                                                                                                • Figure 36: Most trusted source of retirement planning advice: Chinese Canadians against White/Caucasians, June 2014
                                                                                                                                                                                                                                              • Chinese Canadians report a stronger investment knowledge
                                                                                                                                                                                                                                                • Figure 37: Attitudes towards money: Chinese Canadians against White/Caucasians, June 2014
                                                                                                                                                                                                                                                • Figure 38: Attitudes towards retirement planning: Chinese Canadians against White/Caucasians, June 2014
                                                                                                                                                                                                                                            • The Consumer – Target Groups

                                                                                                                                                                                                                                              • Key points
                                                                                                                                                                                                                                                • Three target groups
                                                                                                                                                                                                                                                  • Figure 39: Target groups, June 2014
                                                                                                                                                                                                                                                • Group 1: Avoiders (45%)
                                                                                                                                                                                                                                                  • Group 2: Planners (27%)
                                                                                                                                                                                                                                                    • Group 3: Worriers (28%)
                                                                                                                                                                                                                                                    • Appendix – The Consumer – Ownership of Retirement Savings Accounts

                                                                                                                                                                                                                                                        • Figure 40: Ownership of retirement savings accounts, June 2014
                                                                                                                                                                                                                                                        • Figure 41: Ownership of retirement savings accounts, by demographics, June 2014
                                                                                                                                                                                                                                                        • Figure 42: Ownership of retirement savings accounts (continued), by demographics, June 2014
                                                                                                                                                                                                                                                      • Repertoire analysis
                                                                                                                                                                                                                                                        • Figure 43: Repertoire of ownership of retirement savings accounts, June 2014
                                                                                                                                                                                                                                                        • Figure 44: Repertoire of ownership of retirement savings accounts, by demographics, June 2014
                                                                                                                                                                                                                                                    • Appendix – The Consumer – Amount of Retirement Savings

                                                                                                                                                                                                                                                        • Figure 45: Value of retirement savings, June 2014
                                                                                                                                                                                                                                                        • Figure 46: Value of retirement savings, by demographics, June 2014
                                                                                                                                                                                                                                                        • Figure 47: Value of retirement savings (continued), by demographics, June 2014
                                                                                                                                                                                                                                                        • Figure 48: Value of retirement savings, by product ownership, June 2014
                                                                                                                                                                                                                                                    • Appendix – The Consumer – Trust in Retirement Planning Advice

                                                                                                                                                                                                                                                        • Figure 49: Most trusted source of retirement advice, June 2014
                                                                                                                                                                                                                                                        • Figure 50: Most trusted source of retirement advice, by demographics, June 2014
                                                                                                                                                                                                                                                    • Appendix – The Consumer – Retirement Planning Activities

                                                                                                                                                                                                                                                        • Figure 51: Retirement planning activities performed, June 2014
                                                                                                                                                                                                                                                        • Figure 52: Most popular retirement planning activities performed, by demographics, June 2014
                                                                                                                                                                                                                                                        • Figure 53: Next most popular retirement planning activities performed, by demographics, June 2014
                                                                                                                                                                                                                                                        • Figure 54: Other retirement planning activities performed, by demographics, June 2014
                                                                                                                                                                                                                                                    • Appendix – The Consumer – Attitudes towards Money

                                                                                                                                                                                                                                                        • Figure 55: Attitudes towards money, June 2014
                                                                                                                                                                                                                                                        • Figure 56: Attitudes towards money, by demographics, June 2014
                                                                                                                                                                                                                                                        • Figure 57: Attitudes towards money (continued), by demographics, June 2014
                                                                                                                                                                                                                                                        • Figure 58: Attitudes towards money (continued), by demographics, June 2014
                                                                                                                                                                                                                                                    • Appendix – The Consumer – Attitudes towards Retirement Planning

                                                                                                                                                                                                                                                        • Figure 59: Attitudes towards retirement, June 2014
                                                                                                                                                                                                                                                        • Figure 60: Agreement with the statements ‘I worry that government old age security will not be available when I retire’ and ‘It is important to know at what age you plan to retire’, by demographics, June 2014
                                                                                                                                                                                                                                                        • Figure 61: Agreement with the statements ‘I am worried about how I will live when I get older’ and ‘I am worried about paying for healthcare costs as I get older’ and, by demographics, June 2014
                                                                                                                                                                                                                                                        • Figure 62: Agreement with the statements ‘I find it hard to save for retirement’ and ‘Thinking about saving for retirement is overwhelming’, by demographics, June 2014
                                                                                                                                                                                                                                                        • Figure 63: Agreement with the statements ‘I feel that I am on track to retire at age 65 or before’ and ‘I feel that I will be financially secure when I retire’, by demographics, June 2014
                                                                                                                                                                                                                                                        • Figure 64: Agreement with the statements ‘I think information about retirement investing is interesting’ and ‘I worry that I have to rely on my family to take care of me when I retire’. by demographics, June 2014
                                                                                                                                                                                                                                                        • Figure 65: Agreement with the statements ‘I would rather use my money for other things than saving for retirement’ and ‘Retirement is so far off, I don't need to think about it’, by demographics, June 2014
                                                                                                                                                                                                                                                    • Appendix – The Consumer – Retirement Planning and Chinese Canadians

                                                                                                                                                                                                                                                        • Figure 66: Selected demographics, by total population against Chinese Canadians, June 2014
                                                                                                                                                                                                                                                    • Appendix – The Consumer – Target Groups

                                                                                                                                                                                                                                                        • Figure 67: target groups, by demographics, June 2014
                                                                                                                                                                                                                                                        • Figure 68: Ownership of retirement savings accounts, by target groups, June 2014
                                                                                                                                                                                                                                                        • Figure 69: Value of retirement savings, by target groups, June 2014
                                                                                                                                                                                                                                                        • Figure 70: Most trusted source of retirement advice, by target groups, June 2014
                                                                                                                                                                                                                                                        • Figure 71: Retirement planning activities performed, by target groups, June 2014
                                                                                                                                                                                                                                                        • Figure 72: Attitudes towards retirement, by target groups, June 2014
                                                                                                                                                                                                                                                        • Figure 73: Attitudes towards financial planning, by target groups, June 2014

                                                                                                                                                                                                                                                    Companies Covered

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                                                                                                                                                                                                                                                    Retirement Planning - Canada - August 2014

                                                                                                                                                                                                                                                    £3,199.84 (Excl.Tax)