Canadian public pension funds are proving to be an important driver of the country’s economy, contributing more than 877,100 jobs and over C$82 billion (US$65.5 billion), or 3.6%, of its gross domestic product (GDP) annually, according to a recent report from the Canadian Centre for Economic Analysis (CANCEA).
The report found that through the economic activity supported by spending their pension incomes, retired public pension members alone support more than 794,000 jobs and C$74 billion of Canada’s GDP. It said the economic activity supported by the plans creates revenue for the provincial and federal governments through personal, corporate, and consumption taxes, which total nearly C$21.4 billion every year. Additionally, every C$10 of pension payments generates C$16.70 of economic activity.
“These economic activities support demand for labor and subsequent spending, which ripples through the economy,” said the report. Contributions from “pension spending” include all economic activity supported by public-sector pension fund retirees when they spend their retirement benefits payments, and contributions “from operations” include the economic activity driven by public-sector pension plan operations.
The pension funds collectively have approximately C$1.27 trillion invested in assets around the world, with “a good proportion of that invested in Canada,” according to the report. The investments have generated C$92 billion annually over the past five years in returns from those investments.
The report also found that of the 5.26 million active and retired members, 3.37 million, or 64%, are female, and that there are nearly twice as many female members as male members receiving a retirement income from the public-sector pension plans. It also said that retirement benefits provided by the plans “are a major source of retirement income,” as they account for more than 40% of all private retirement income in the country, serving 1.85 million retirees. The remaining 60% is made up of retirement savings programs such as annuity contracts, deferred-profit sharing plans and individual Registered Retirement Savings Plans (RRSPs), and private-sector pension plans.
The research also found that although the number of public-sector plans has been relatively constant over the past 15 years, the active membership has been increasing. There were approximately 3.41 million active members as of 2019, up from 2.65 million active members in 2005. Meanwhile private-sector pension plan membership has been relatively stagnant.
The report also found that:
- Public-sector plan members invest 8% of their salary on average, which amounts to C$43 billion annually when combined with employer contributions;
- As retirees spend their income, the direct and indirect impacts support the equivalent of 55,500 businesses, 72% of which employ fewer than 10 people; and
- More than one in 10 Canadians benefit in some way through receiving retirement income, working in businesses, or being financially supported in their households.