OTTAWA—Workplace pensions—especially Defined Benefits plans—are considered the gold standard for workers’ retirement security, but a new study from the Canadian Centre for Policy Alternatives (CCPA) shows they’re also a boon to government revenues and the economy.
In 2025, pension incomes—and retirees’ spending—will contribute $24.5 billion to federal coffers and $16.8 billion to provincial coffers. That money helps fund vital public services.
However, the proportion of workers covered by Defined Benefit pension plans has dropped dramatically.
The Power of Pensions: The impact of pension income on Canada’s economy, authored by CCPA Senior Economist David Macdonald, shows this:
“In the 1970s, 90 per cent, or more, of all workers with a pension plan in Canada had a Defined Benefit plan—today, only 40 per cent of private sector workers are covered by this gold standard,” Macdonald says. “That’s bad for workers’ security in their senior years, but it’s also bad for the economy.
“Pensioners’ spending contributes a powerful boost to local economies; especially in communities where jobs are hard to find—like Shawinigan, QC, Cornwall, ON or Cape Breton, NS—pension income makes a huge difference.”
The more governments can encourage secure workplace pensions and reverse the private sector decline in their coverage, the better off retirees will be. To add to this, government finances and the economy will be stronger too. Consider that:
- Pension income pays big dividends to governments. They recoup 41 cents for every dollar in pension income.
- Pension income for government workers returns even more: In 2023-24, one pension dollar contributed by government turned into $2.38 in tax revenue.
- Local communities benefit directly from pension income, including the 85 Canadian cities examined in this report.
Public pensions are an especially great equalizer, and this benefits equity-seeking groups: For example, just under half of women, Indigenous Canadians and new Canadians employed in the private sector have pensions. That number stretches to 80 per cent and beyond for those employed in the public sector.
“Making public sector retirement security more like the private sector in this regard would be a huge step backwards, says Macdonald. “The power of pension plans couldn’t be clearer. Workplace pensions are good for workers, but they also provide tremendous returns for governments and the economy. If governments want to save on seniors’ income supports and maximize tax revenues, encouraging workplace pensions is one of the most effective ways of doing so.”
An interactive map of the report data, covering 85 cities and all postal codes in Canada, is available at: https://monitormag.ca/articles/pensions-map/
For more information and interviews please contact Amanda Klang, CCPA Senior Communications Specialist (Media & PR) at [email protected]
