Survey reveals pandemic has impacted contribution intentions in spite of increased savings rates
While RRSP season is in full swing, Canadians appear to be scaling back their contribution plans as the impact of the COVID-19 pandemic prompts a re-evaluation of financial priorities, according to a new study.
In a new poll of roughly 1,500 Canadians, Edward Jones found that 52% do not plan to contribute to their RRSP this year. Among those, 44% said they can’t afford to due to the effects of the pandemic, while the other 56% said they’re prioritizing other strategies, such as paying down their mortgage or investing in TFSAs.
The decision by half of Canadians to hold off on contributions comes despite Canada’s household savings rate being at its second-highest level since the early ‘90s, according to Statistics Canada. Figures from Q3 showed Canadians saving 14.9% of their disposable income, in contrast to 3% during the same period in 2019.
The survey also confirmed that 31% of Canadians are contributing to their RRSP, among whom only 31% plan to maximize their contributions.
"During times like these, it's important that investors make informed investment choices and avoid 'knee-jerk' financial decisions, that provide a short-term sense of security but don't serve their long-term financial goals such as retirement,” said Edward Jones Canada President David Gunn. “Finances can be daunting, but you don't have go at it alone; a financial advisor can help assess a financial situation and potentially uncover solutions investors may have missed themselves.”
The findings are in line with a study Edward Jones conducted with Age Wave, which was published last August. In that one, one third of those with plans to retire said they were considering doing so later because of the pandemic, with the predominant reasons being a need for more income, a decline in savings, investment losses, and heightened uncertainty about the amount of money they’d require to retire.
But even as COVID-19 puts a squeeze on their finances, Canadians don’t seem to be paying due attention to their planning. Asked how often they think about their retirement savings, 20% of respondents admitted they never do. Among those making RRSP contributions this year, a fifth said they’re just accumulating wealth with no goal in mind, which squares with another finding that 31% find RRSP season to be transactional without seriously evaluating how their contributions feed their short- and long-term financial goals.
“It's clear the pandemic has had an adverse effect on how Canadians approach their finances. Competing financial priorities have led many to lose sight of what they're saving for in the long run,” said Gunn. “While there are fiscal benefits to contributing to your RRSP, it might not be the right strategy for everyone. Canadian investors don't have to compromise their financial goals - it's a balancing act.”
