Legal for Life: Why Canadians Need a Lifetime Retirement Saving Limit

Federal tax rules are preventing many Canadians – especially in the private sector – from saving enough for retirement, according to a report released today by the C.D. Howe Institute. Workers relying on RRSPs cannot accumulate even half the retirement wealth of career members of defined-benefit (DB) pension plans, says the report, “Legal for Life: Why Canadians Need a Lifetime Retirement Saving Limit,” by James Pierlot with Faisal Siddiqi.

“Solving this ‘have’ and ‘have-not’ divide in the pension outlook for Canadians is becoming urgent,” says Pierlot. More than 12 million Canadian workers do not participate in a DB pension plan. Many of these workers need to save for retirement, and must do so in RRSPs and defined-contribution (DC) pension plans. The authors demonstrate that tax rules prevent these workers from saving enough, even as career members of DB plans accumulate retirement savings worth as much as 60% of their total career incomes.