Canadians are likely to save more in their Registered Retirement Savings Plan this year, according to a new study from CIBC World Markets Inc.
Higher disposable incomes, rising savings rates, renewed confidence in the stock market and lack of confidence in government and corporate retirement plans are leading Canadians back into mutual funds and other RRSP plans, it says.
Big stock market gains since the lows of March 2009 almost guarantee the current RRSP season will be stronger and investors probably will be attracted to equity and income funds, said Benjamin Tal, senior economist and author of CIBC's latest Consumer Watch report. "If history is any guide, RRSP contributions usually dance to the tune of the stock market."
A recent softening in the equity market will keep investors cautious, the report notes.
Tal dismissed any concerns that Canadians lack the extra cash to increase RRSP contributions this year, saying the job market has improved and, with a boost from tax policies, overall disposable income in Canada has risen almost 3.5% (at an annual rate) in the six months, ending September 2009.
The savings rate is now just under 5% -- its highest level in about nine years.
Last year, the study found the number making an RRSP contribution fell 1.8%. An overall decline in contributions of 2.2% for 2008 was the largest drop in six years.
Meanwhile, an annual retirement survey of 1,457 Canadians, interviewed online by Ipsos Reid for the Royal Bank of Canada, found just over half (54%) expect their pension, whether from an employer or a government, to be the single largest source of income in retirement. Yet one-in-five do not know what sort of pension plan they have.
Thirty per cent of Canadians, 35-54, expect to work in retirement, suggesting the concept of a traditional retirement is disappearing.
