Article content continued

So what happens when we factor in the sizeable amount of fourth-pillar assets, and to a lesser extent, RRSPs? Slightly less than half of this targeted group has accumulated enough value to retire comfortably in the future, at 65. Instead of the “at-risk” targeted group being two in five Canadian households, it is actually one in five. While still an important group, it is much smaller than many policy-makers would like us to think.

Growth opportunities

Additionally, about a third of the remaining at-risk group is actually in the top-income quintile. This is positive, in a sense, since top-income households have the most opportunity to increase savings during their ongoing careers to get to the point they need to be at in retirement. They also have the most flexibility to downsize in retirement.

So overall, the results in our study cast doubts on the narrative that voluntary savings are inadequate for most people who do not have a workplace pension. It also means that many of those who will be compelled to save more via CPP may not in fact need it to ensure living-standard continuity in retirement. There is no retirement-preparedness crisis, and the savings shortfalls are certainly more targeted.

That is not to say there aren’t potential benefits to enhanced CPP. The CPP Investment Board has acquired a reputation of delivering high returns and is able to tap into investment opportunities unavailable to most individuals. It can also provide protection against outliving retirement wealth at a lower cost than that available to retail investors. But here the CPP is not alone. Large life insurers, for example, have also shown to be adept pension managers, at competitive costs.

The bottom line is that households accumulate wealth through many different channels. Mandating new retirement wealth accumulation through one channel may impact the level of accumulation in other channels. Therefore, it is important to assess the impact of each pillar of retirement wealth, including the fourth pillar, to get a fuller picture of retirement preparedness.

Jeremy Kronick and Alexandre Laurin are co-authors of “The Bigger Picture: How the Fourth Pillar Impacts Retirement Preparedness,” published by the C.D. Howe Institute.