Yahoo Finance RRSP contributions resume decline after pandemic upends savings trends
Canadians 55–64 faithfully followed a consistent pattern — until they didn't
Every year since the turn of the millennium, Canadians 55 to 64 years old have increased their RRSP contributions, the most consistent age cohort as measured by Statistics Canada.
But in 2022, that changed, Statistics Canada’s latest data show — with that age cohort recording a 6.1 per cent decrease in total contributions, the biggest drop of any age category.
It’s a development, experts say, that is likely more about the disruptive effects of the COVID-19 pandemic than about a radical change in investment strategy since then.
Statistics Canada analyst Dominique Pinard, who oversees the file that includes RRSP data, says the figures that stand out are not those from 2022 but from the pandemic years before. “We noticed that in 2020 and 2021, there was a lot of increase in interest in RSP contribution,” she said. “So people were contributing more as their savings were higher.”
The year-over-year increase in RRSP contributions for the 55 to 64 age group was over nine per cent in 2020 and more than 12 per cent in 2021, substantially higher than the average yearly increase from 2000 to 2019 of around 5.5 per cent.
Statistics Canada data support the higher savings theory. During the pandemic, Canadians’ household saving rate, which typically hovers in the low single digits in any given quarter, was substantially higher — up to 26.5 per cent in the second quarter of 2020.
“COVID broke a lot of our charts,” said Jason Pereira, a senior partner and financial planner at Woodgate Financial. “Look at unemployment — it was a massive spike. There were a lot of things that got pulled forward that are basically being normalized” in the aftermath of the pandemic.
Return to a downward RRSP trend
Among the trends being normalized is a long-term trend away from RRSPs. Before the pandemic, Statistics Canada had registered a 12-year downward trend in the proportion of tax filers making RRSP contributions. In 2000, around 29 per cent of tax filers made an RRSP contribution, a number that had declined to 21.8 per cent by 2019, before climbing back to 22.3 per cent in 2020 and 22.4 per cent in 2021.
The 2022 data resumed the downward trend, with 21.7 per cent of tax filers contributing to an RRSP. That proportion declined among all age groups. Total contributions also fell, though the 0–24 and 25-34 cohorts saw total contributions go up.
Pinard notes that RRSP data do not tell the whole story of Canadians’ habits around retirement and investing. Registered Pension Plan (RPP) contributions and, in particular, Tax-Free Savings Account (TFSA) contributions are a significant part of the overall picture — and the percentage of Canadian families contributing to one or more of RPP, RRSP and TFSA also reached a record high (58.1 per cent) during the pandemic.
Since their introduction in 2009, TFSAs have become increasingly central to retirement savings strategies. In 2020, more than half of Canadians’ total contributions to registered plans went to TFSAs.
This doesn’t suggest that RRSPs are on the way out. As Pereira notes, “there’s an intelligent way to use [TFSAs and RRSPs] based on your life cycle of income.”
What that looks like on a macro scale in the years ahead “will be dictated by demographics like it always is,” he said.
“The reality is that it's going to depend upon the number of people in each cohort plus wages and cost of living, those things.”
John MacFarlane is a senior reporter at Yahoo Finance Canada. Follow him on Twitter @jmacf.
Download the Yahoo Finance app, available for Apple and Android.
