CD Howe Institute puts defined benefit plans at 41% of covered workers by 2023
Private-sector registered pension plan coverage has fallen from 35 percent of workers in 1980 to fewer than one in four, and about 17 percent of core-age private-sector workers after correcting for double counting in official statistics.
The coverage figures appear in Cracks in the Foundation: The Future of Canada’s Retirement Income System, Commentary 733, published in October by the Toronto-based CD Howe Institute, which attributes the core-age estimate to research on the labour market impacts of employer-pension plans by Benoit Dostie and Todd Morris.
Plan quality has moved with coverage.
Of covered private-sector workers, 90 percent had a defined benefit plan in 1980, compared with 41 percent in 2023, leaving fewer than one in 10 private-sector workers with access to a DB pension.
Authors Pierre-Carl Michaud, a professor in the Department of Applied Economics at HEC Montréal and president and CEO of CIRANO, and David Boisclair, executive director of the Retirement and Savings Institute at HEC Montréal, draw mainly on Statistics Canada’s Longitudinal Administrative Databank, covering tax records for 20 percent of the population, with a sample of 980,000 taxpayers turning 70 between 2002 and 2022.
Public and private pensions together replaced 48 percent of pre-retirement income at age 70 in 2022, down from 58 percent two decades earlier.
Public pensions, defined as OAS, GIS and CPP/QPP combined, fell from 31 percent to 27 percent; private pension income, which in the LAD includes registered pension plans, RRIF withdrawals and taxable annuity income, fell from 27 percent to 21 percent.
Average family after-tax replacement rates held between roughly 80 percent and 90 percent across the period.
“Traditional pensions are playing a smaller role in financing Canadians’ retirement,” Michaud said in the CD Howe Institute’s release announcing the report. “Other sources, including employment income, dividends, and RRSP withdrawals, have helped fill the gap. But unlike pensions, employment income cannot be relied upon throughout retirement.”
Employment income added 6 percentage points to the gross replacement rate over the period, dividend income 3 points and RRSP income 1 point. Investment income fell 3 points.
Public pensions’ contribution to the gross replacement rate in the third decile fell by more than 19 percentage points between 2013 and 2022, from 80 percent to 61 percent.
The decline in the eighth decile was 2 points, from 23 percent to 21 percent.
Deciles 3 and 8 correspond to average after-tax pre-retirement incomes of about $28,900 and $72,700 for the cohort turning 70 in 2022.
The share of taxpayers with replacement rates below 60 percent rose by 7 to 13 percentage points across cohorts in deciles 3 to 5, and up to a third of seniors below the median have low replacement rates, according to the authors’ working paper on retirement incomes in Canada.
OAS and GIS are indexed to inflation rather than wage growth. If real wage growth runs 1 percent above inflation, OAS’s income replacement value falls by more than 22 percent over 20 years without intervention.
The 10 percent OAS increase introduced in 2022 for Canadians aged 75 and over partly offset the erosion for older seniors without changing the indexation mechanism.
Membership growth in some jurisdictions, including more than 200,000 new plan members in Ontario in 2025, mostly in DB plans, reflects membership counts rather than coverage rates and includes public-sector plans, the authors note, citing the Financial Services Regulatory Authority of Ontario’s March news release.
The authors assess a proposal to subsidize small businesses to offer employee pensions, set out in an earlier CD Howe Institute Commentary by Keith Ambachtsheer and Alex Mazer, and say administrative burdens remain and the subsidy could provide windfall gains to employers that would have offered a plan anyway.
They point to low take-up of Pooled Registered Pension Plans as evidence a stronger approach is required.
Quebec’s law on Voluntary Retirement Savings Plans requires employers to offer a basic savings plan with auto-enrolment.
Enforcement is limited and employer contributions remain voluntary.
In its most recent budget, the Quebec government announced it would study options to strengthen VRSPs, including a possible public VRSP managed by an independent organization, similar to the National Employment Savings Trust in the UK.
Their own reform option combines OAS and GIS into a targeted Canadian seniors benefit and shifts income replacement to an expanded CPP/QPP.
OAS payments excluding GIS are planned to total nearly $68bn in 2026/27.
