Canada’s Retirement System May Have Worked in the Past. Will It Work Tomorrow?

November 3, 2026 – Canada’s retirement income system has served seniors well, but declining income replacement in retirement raises concerns about retirement security for future generations, according to a new C.D. Howe Institute report.

In Cracks in the Foundation: The Future of Canada’s Retirement Income System, authors Pierre-Carl Michaud and David Boisclair examine how Canada’s retirement income system has performed in meeting its twin objectives of replacing pre-retirement income and protecting seniors from poverty.

The authors find that many traditional indicators remain positive. Poverty among seniors remains low, median net worth among households aged 65 and older has more than doubled in real terms since 1999, and average income replacement rates remain relatively high.

“Traditional pensions are playing a smaller role in financing Canadians’ retirement,” says Michaud, Professor in the Department of Applied Economics at HEC Montréal and President and CEO of CIRANO. “Other sources, including employment income, dividends, and RRSP withdrawals, have helped fill the gap. But unlike pensions, employment income cannot be relied upon throughout retirement.”

Public and private pensions now replace 10 percentage points less of pre-retirement income than they did two decades ago.

The authors also highlight growing disparities in retirement outcomes. Low income-replacement rates are becoming more common among lower-middle earners, particularly those without workplace pensions. In 2023, households aged 65 and older had a median net worth of approximately $1.1 million, but this headline figure masks substantial differences in financial circumstances, particularly between homeowners and renters and between those with and without workplace pensions.

Other warning signs include declining private-sector pension coverage and the gradual erosion of Old Age Security’s income-replacement role, as benefits indexed to inflation fall behind wage growth.

“A decade after the 2016 agreement to enhance the Canada and Québec Pension Plans (CPP/QPP), it’s time to take another look at Canada’s retirement income system,” says Boisclair, Executive Director of the Retirement and Savings Institute at HEC Montréal. “We need to examine whether and how the system is still striking the right balance between protecting seniors from poverty and helping Canadians maintain their standard of living in retirement.”

To address these challenges, the authors explore several options for strengthening retirement income adequacy, including a targeted Canadian Seniors Benefit that would combine OAS and GIS’s poverty protection function, shifting OAS’s income-replacement role to an expanded CPP/QPP, and strengthening employer-based retirement savings for workers without workplace pensions.

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The C.D. Howe Institute is an independent not-for-profit research institute whose mission is to raise living standards by fostering economically sound public policies. Widely considered to be Canada’s most influential think tank, the Institute is a trusted source of essential policy intelligence, distinguished by research that is nonpartisan, evidence-based and subject to definitive expert review.

For more information, contact: Pierre-Carl Michaud, Professor in the Department of Applied Economics at HEC Montréal; David Boisclair, Executive Director of the Retirement and Savings Institute at HEC Montréal; and Vaishnavi Santhirathasan, Communications Coordinator, C.D. Howe Institute, 416-865-9935, vsanthirathasan@cdhowe.org.