Header graphic for print
Pensions & Benefits Law A Discussion of Canadian and U.S./Cross-Border Pension & Benefit Legal Issues

Pension Coverage in Canada: What Does the Future Hold?

Posted in Canada Pensions & Benefits Law, Pension Reform

Over the last couple of years, Canadian federal and provincial governments have expressed concern over declining pension coverage. They have responded by appointing expert commissions to study the matter, and by proposing possible solutions such as pooled registered pension plans and modest enhancements to the Canada Pension Plan.

These concerns regarding declining pension coverage appear to be supported most recently by statistics released by the Office the Superintendent of Financial Institutions (OSFI) although, perhaps surprisingly, the decline does not seem to be as precipitous as one might have expected.

The percentage of paid workers who are members of registered pension plans (RPPs) declined from 41% in 1999 to 39% in 2009, a drop of only 2%. Interestingly, this decrease appears to be due to a significant decrease in the percentage of men who participate in RPPs – with their participation rate declining from 42% in 1999 to 38% in 2009. During this same time, the coverage for women increased from 39% to 40%. Also of note is the fact that the number of workers covered by pension plans actually increased during the period, from 5.3 million to 6 million; however, the workforce grew at a faster pace, thus leading to the decline in the percentage of workers with pension coverage.

The statistics also demonstrate the well-known disparity between the public and private sectors, with RPP coverage for the public sector at 86% in 2009, versus only 25% for the private sector. There is also a large disparity in the type of pension plans offered. While the proportion of pension plans offering defined benefit (DB) coverage in the public sector has been stable between 1999 and 2009 (at 94%), there has been a significant reduction in the proportion of pension plans offering DB coverage in the private sector (from 76% to 56%).

These statistics make it clear that while overall pension coverage is not declining as quickly as some might have thought, DB plans are indeed on the decline, at least in the private sector. Whether the various pension reform initiatives introduced across Canada will serve to slow this trend remains to be seen.