More Canadians added to RRSP: poll

After more than a year of economic turmoil and volatile markets, Canadians have returned to their retirement plans, according to the fourth annual Investors Group RRSP Exit Poll.

The survey found that 36% of Canadian adults made RRSP contributions during the 2009 tax year, up from 31% in the prior year. When it comes to investing their RRSP contribution, however, 16% of Canadians simply parked the cash in short-term vehicles, such as bonds and money market funds.

While the RRSP remains popular, there has been some speculation that contributions would be eroded by the Tax Free Savings Account, which became available Jan. 1, 2009. The Investors Group poll found 37% of those who contributed to their RRSP also contributed to a TFSA.

While the number of Canadians contributing increased, the median RRSP contribution dropped from $3,000 last year to $2,500 for the 2009 RRSP season, a decline of about 17%.

On the TFSA side, Canadians appear to be taking full advantage, with the median TFSA contribution holding steady at $5,000, according to Ammeter.

“A lower median RRSP contribution is not surprising, given that people now have a TFSA option,” she says. “Some Canadians are dealing with scarce resources and can’t do everything.”

To date, 31% of Canadians have opened a TFSA, compared to just 17% who had opened one at this time last year.

Canadians aged 35 to 44 were most likely to contribute to their RRSP, with 57% saying they had done so this year. Meanwhile respondents over 55 years of age were the most likely to contribute to their TFSA, at 43%, compared to the national rate of 31%.

“With both offering tax saving advantages and flexibility, the RRSP and TFSA are two sides of the same coin,” says Debbie Ammeter, vice-president, advanced financial planning support at Investors Group. “It’s encouraging to see more Canadians taking advantage of ways to keep more money working for them.”

These results of the Investors Group poll are roughly in line with the findings of a BMO survey released last week, which found 38% of Canadians beat the March 1 contribution deadline. The main reason respondents gave for not making a contribution were cash flow issues and lack of available funds.

“There will be times when money becomes harder to come by, but your retirement savings should not be the first area to suffer,” Serge Pépin, director, BMO Investments, said in that earlier report. “When money is tight, Canadians simply need to find ways to get creative with their cash flow in order to continue saving for their future.”

The Investors Group survey went beyond simple contribution rates, though, and found 82% of those investors who worked with a financial advisor said their advisor was either helpful or very helpful. In fact, 17% decided to contribute more money to their RRSP after speaking with an advisor.

Canadians between 35 and 44 years old were most likely to increase their investment after consulting their advisor, at 29%.

“Working with a financial advisor helps Canadians build their retirement plans and keep them on track,” Ammeter said. “A well developed plan that includes lifestyle and financial considerations is a key factor in a rewarding and enjoyable life in retirement.”

(03/08/10)