Challenges for Canadas Retirement Income System (RIS)
While HRSDC has been undertaking research on Canadas RIS, a number of key knowledge gaps and issues remain. These include the following:
Evaluate the sustainability of the decline in low-income rates for seniors. This would involve reassessing the decline in low-income rates among seniors over the past two decades and the roles played by changes in OAS and the maturation the Canada Pension Plan (CPP) and of RPPs). This project could be based either on cross-sectional or longitudinal data such as the Survey of Labour and Income Dynamics (SLID) or the Longitudinal Worker File (LWF).
Understanding causes of receipt of the GIS, including patterns of entry into the program post-age 65. This would include analysis of what factors prior to age 65 years led people to become GIS recipients. This project could be based either on cross-sectional or longitudinal data such as the SLID or LWF.
Understanding the effects of different types of RPPs on labour mobility and income in retirement (e.g., DB plan portability and vesting). This project could be based either on cross-sectional or longitudinal data such as the SLID or LWF. However, lack of detail on pension type in most data sources limits the possibilities. The issue of including data on pension type in the LWF could be explored.
Changing cohort patterns in the sources of future retirement income (e.g., declines in DB plan coverage, increased RRSP contributions, lower earnings, and a delayed start to savings by younger cohorts). This project would largely be based on a synthetic cohort analysis using either data from the Survey of Consumer Finances, SLID or administrative data (e.g. LWF).
RPPs in the context of employee compensation and human resource strategies. What are the plans/objectives of firms? How do these vary by sector? This project could involve a survey of employers.
Financing of DB plans how critical an issue? (e.g., costs of DB plans, management of DB plan surpluses/deficits, the composition of DB plan investments). This would involve a more extensive discussion of the theoretical literature e.g. the financial economics view of pensions with reference to the Canadian situation including data.
Macro-economic issues related to a pay-as-you-go (PAYG) RIS versus a savings-based RIS. Issues could include: balance of risks and costs for individuals, cyclical stability of PAYG systems and the personal saving rate; the role of changing asset prices in both systems; and the longer-term implications of claims on future output (notably in a context of population ageing). This project would largely be based on a discussion of the theoretical literature but could include as an examination of empirical evidence e.g. savings-rate behaviour.
Impacts of cyclical downturns on the third pillar of the RIS and potential policy responses. The project should include a discussion of the implications of:
- Effects on DB plans, including declining DB plan funds, changes to contributions and/or benefits and employer bankruptcy;
- Declines in the value of DC plans;
- Declines in the value of individual retirement savings (e.g. RRSPs).
The project would consider the implications of individual responses to these developments such as increased saving or deferred retirement.
What factors explain the level of RRSP contributions and/or assets of households? The analysis should include a discussion of the role of tax incentives for RRSP saving and the household budget constraint e.g., constraints imposed on RRSP saving arising from other obligations such as mortgages.
What factors influence the strategies/abilities of individuals/households to manage assets/debts. Use could be made of the Canadian Financial Capability Survey (CFCS) of Statistics Canada.
