Survey respondents show a limited grasp of the multi-pillar system, with barely-passing marks on general financial knowledge
As people face longer lifespans, rising healthcare costs, and increasing pressure to support children into adulthood, planning for retirement is only becoming more important. A crucial part of that is knowing how the system works — which, according to a new survey, is something Canadians need to do better at.
In the first-ever edition of its RSI Index, the Retirement and Savings Institute at HEC Montreal surveyed a population of 3,000 Canadians aged 35 to 54 years old.
“The 35-54 age group was targeted because it includes those individuals who should be in an accumulation phase with respect to retirement savings,” the report said.
The participants were quizzed and scored on their general financial knowledge, as well as tax-sheltered saving, employer plans, the Canada Pension Plan or Quebec Pension Plan (depending on the province), and Old-Age Security and the Guaranteed Income Supplement (GIS).
“For the first edition, the overall index is 36.5%, reflecting a limited knowledge of our multi-pillar system and of certain key concepts,” the report said.
Breaking down the responses based on demographic groups, the survey found that older individuals who are closer to retirement do slightly better; 45- to 49-year-olds got an overall index score of 37.6%, while 50- to 54-year-olds scored 40.2%. Higher scores were also associated with education (respondents with a Bachelor’s degree or higher averaged 45%).
Income also seemed to be a factor. Respondents with a household income of $60,000 to S90,000 scored 37.5% on average, while those within the $90,000 to $120,000 range scored 41%. Those with household incomes of $120,000 and over did even better, scoring an average of 46.1%.
Participants had the greatest difficulty answering questions on employer plans and Old-Age Security; on the latter topic, most respondents couldn’t correctly answer more than two out of eight questions.
On general financial knowledge, respondents to the survey garnered 61%, which was barely a passing grade. Participants showed the lowest success rate in answering questions about bonds (“If interest rates rise, what will typically happen to bond prices?”) and debt doubling (asking how long it would take for a $1,000 debt to double given a 20% compound annual interest rate).
“Limited knowledge of the system could put at a disadvantage those relying on private savings, as much as lower-earning individuals – who might be more likely to depend on public programs,” the report said.
Follow WP on Facebook, LinkedIn and Twitter
