Most Canadians are saving enough for retirement: Malcolm Hamilton


Do Canadians save too little? Malcolm Hamilton doesn’t think so.

In a recent Commentary he wrote for the C.D. Howe Institute, the retired pension actuary and C.D. Howe Senior Fellow concludes that Canadians are reasonably well-prepared for retirement. Most save more than the 5% household savings rate. Most can retire comfortable on less than the traditional 70% replacement target.

I wasn’t surprised to read this new research, because Hamilton’s views have been entirely consistent throughout his career. In fact after digging through back issues of Employee Benefit News Canada (I was formerly the editor) and searching computer directories, I finally found this 2005 story where I reported on Hamilton’s 2005 keynote presentation to the International Foundation’s 38th annual Canadian Employee benefits Conference.

In a humorous and engaging talk, he compared the finances of “Dave and Julie” both before and after retirement. He concluded that once this couple no longer has to pay a mortgage, contribute to RRSPs and RESPs, pay employment expenses and raise children, they will have almost 3x more disposable income than when they were working.

He also noted that even the poorest seniors in Ontario get government assistance from Old Age Security, the federal Guaranteed Income Supplement, the Ontario Guaranteed Annual Income System and refundable tax credits that add up to $20,900. A couple where one individual works until age 65 can collect close to $30,000 in government benefits including Canada Pension.

Fast forward 10 years, and Hamilton gave a very similar speech to the MoneySense Retire Rich conference last November.

In a new C.D.Howe study, Hamilton expanded upon his previous work by discussing the retirement savings habits of Canadians in the context of the Ontario Registered Pension Plan (ORPP) the Ontario government plans to roll out 1/1/2017.

He calls the ORPP “a blunt tool to address poorly defined problems.” He also says:

“If the ORPP had been incorporated in the Canada and Quebec Pension Plans 50 years ago, the problems cited by the province of Ontario would still be with us today. The household saving rate would be low – probably lower than it is now. Public pensions would be inadequate for many. Most Canadians would not be saving enough to replace 70% of their employment income.

There would be large and growing amounts of unused RRSP room. Large numbers of Canadians would be without workplace pensions. And yes, Canadians would be living longer with each passing year. Even if one believes that Canadians are saving too little for retirement, the ORPP is an ineffective remedy. The cost is too low to make a meaningful difference and the benefits are badly targeted.”

In addition, Hamilton notes that to the extent there is an undersaving problem, it is for mid- to high-income workers in the private sector. Yet according to Ontario estimates, 1/3 of ORPP participants will make less than $15,000 per annum and almost ½ of these will be under 25.

He concludes that all a beefed up CPP/QPP can do is establish a new common denominator. Beyond that, he says we need better-targeted programs that can recognize and address our individual needs.

While Hamilton’s arguments are persuasive, the C.D. Howe paper does not go so far as to suggest the kind of “better-targeted” programs that will encourage or require individuals who are not saving enough to up the ante. There is certainly little indication that pooled registered pension plans (PRPPs) will be the necessary catalyst.

And Hamilton’s views are only one part of the picture. For only a few articles espousing the other side of the argument, see:

Why we need to go big on CPP Financial Post December 12, 2013
Paul Forestall
Why CPP expansion is inevitable | Benefits Canada November 13, 2013
Greg Hurst
Expanded CPP essential to boost Canadians’ inadequate savings, report finds The Globe & Mail, April 23, 2014 Janet MacFarland
Expanded CPP gains broad acceptance from employers: Survey Canadian HRReporter, Morneau Shepell, December 2013






  1. I think most folks can retire on less than 70% of their working income provided a) they own their home at the time of retirement and b) they are no longer contributing to TFSAs, RRSPs and RESPs.

    The wildcards in all our future are health status, longevity risk, inflation, interest rates, market returns and taxes. If we’re not saving on our own, and relying on the aforementioned government programs to save us we’ll all suffer.

    Hope all is well Sheryl!

    • All is very well. Nice to hear from you Mark.

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