Posthaste: Canada’s pension gap threatens retirement security for millions of Canadians

Canada ranks fairly high on the

Global Pension Index

, but for one glaring weakness.

The biggest vulnerability, identified by the index, is the vast number of Canadians without a workplace retirement plan, especially in the private sector.

More than nine million Canadian employees lack such a plan, which research has shown is key to retirement security, and those numbers are even higher when you count the 2.7 million Canadians who are self-employed, says a

report from the C.D. Howe Institute.

Just 37 per cent of private sector employees are covered by some sort of

retirement benefit

, while 87 per cent of public sector workers are members of a registered pension plan.

It’s a big gap and when you consider that coverage in the private sector has increasingly shifted from defined benefit plans to defined contribution, “the post-work financial security gap between public-sector and private-sector workers has been growing,” said the report.

“Even assuming the broadest definition of private-sector pension coverage, it still means that a very large number of Canadians are not covered by a workplace retirement plan of any kind,” said the report’s authors, Keith Ambachtsheer, director emeritus of the International Centre for Pension Management at the Rotman School of Management, and Common Wealth CEO Alex Mazer.

Only about 19 per cent of small and medium-sized businesses with five to 499 employees in Canada provide a pension plan, compared to about 50 per cent of American firms of similar size. In a 2024 survey by the

Healthcare of Ontario Pension Plan (HOOPP)

, cost was the top reason companies did not offer these benefits.

Australia, the United Kingdom, and most recently Quebec require employers to enrol their employees in a workplace pension plan, and one day more jurisdictions in Canada may follow suit, said the report. But right now with the economic environment is such a challenging spot, forcing the benefit would be a hard sell.

Instead Ambachtsheer and Mazer recommend the federal government take a “carrot approach” by offering businesses tax relief if they set up a workplace plan.

The Small Employer Retirement Plan Tax Credit would include credits for the expenses of setting up the plan and to cover 50 per cent of employer contributions for workers earnings $50,000 a year, and 25 per cent for workers earning $100,000 for up to three years.

At a cost to Ottawa of up to $2 billion over five years, the credit could expand coverage to another 125,000 to 500,000 Canadians and cut the cost of businesses offering a plan by nearly half.

The report cites a host of studies on how important a workplace pension plan is to retirement security. A retirement income calculator developed last year determined that households with no such coverage were less likely to maintain their living standard in retirement.

And a HOOPP survey in 2025 found 53 per cent of those without a plan had less than $5,000 saved for retirement.

“Much work still lies ahead for governments, regulators, and private-sector leaders to return Canada to its place as home to one of the world’s top retirement income systems,” said Ambachtsheer and Mazer.

TFSA vs. RRSP: A wealth-building series from the Financial Post

It’s one of the most important — and sometimes confusing — savings decisions Canadians face, and the right answer depends on far more than a simple rule of thumb. The Financial Post series called

TFSA vs. RRSP

, breaks down the key questions in deciding between the two accounts, including mistakes to avoid and how to get the most bang for your buck.

Read the series here.

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When is a drop in the unemployment rate not good news?

When it falls for the wrong reasons.

Canada’s economy lost 25,000 jobs last month, but the jobless rate fell from 6.8 per cent to 6.5 per cent,

Statistics Canada said Friday.

The key to this apparent discrepancy is a falling participation rate which declined by 0.4 percentage points to 65 per cent — the lowest since 2021.

Fewer people were looking for work as the labour force shrank by 119,000 people, the most in five years.

“The decline in the unemployment rate is therefore for the wrong reasons — a shrinking labour force rather than job creation. Combined with slower wage growth, the report underscores ongoing economic weakness,” said BofA Global Research.

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Do you know your TFSA from your RRSP? While both savings vehicles can help Canadians build wealth and plan for retirement, there are numerous differences in how they are structured. The Financial Post explains how each account works, who is eligible and how you can use them to save for the future.

Find out more

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McLister on mortgages

Want to learn more about mortgages? Mortgage strategist Robert McLister’s

Financial Post column

can help navigate the complex sector, from the latest trends to financing opportunities you won’t want to miss. Plus check his

mortgage rate page

for Canada’s lowest national mortgage rates, updated daily.

Financial Post on YouTube

Visit the Financial Post’s

YouTube channel

for interviews with Canada’s leading experts in business, economics, housing, the energy sector and more.

Today’s Posthaste was written by Pamela Heaven with additional reporting from Financial Post staff, The Canadian Press and Bloomberg.

Have a story idea, pitch, embargoed report, or a suggestion for this newsletter? Email us at 

posthaste@postmedia.com

.

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