By David HodgesTwo-thirds of households are setting aside money for retirement, taking advantage of either a registered pension plan, an RRSP or a tax-free savings account, Statistics Canada said Wednesday as it released the latest batch of numbers from the 2016 census.Of 14 million households, 65.2 per cent made a contribution in 2015 — the most recent year for which data was available — to one or more of the three major savings vehicles, an apparent counterpoint to the prevailing narrative that too many Canadians take a cavalier approach to retirement.Different generations took different approaches: Major income earners aged 35 to 54 were prone to make use of registered pension plans and RRSPs, while those younger than 35 and those older than 54 were more likely to contribute to a TFSA.Or, in Statistics Canada’s words: “Participation in savings plans followed strong life-cycle patterns.”Savings profileIt’s the first time the census has probed the question, taking advantage of tax data to paint a more accurate picture of just how seriously Canadians take it — a picture which experts say has long been distorted by suspect data and aggressive investment marketing.“I think things in general are still in pretty good shape when it comes to preparing for retirement,” said Fred Vettese, chief actuary at Morneau Shepell in Toronto.“For the most part, when you look at middle-income Canadians they are saving. So one of the problems with the statistics is that they end up being misleading.”Vettese said he’s particularly frustrated by the oft-cited national household saving rate, which landed at 4.6 per cent in the second quarter of this year, compared with 20 per cent in 1980.“That’s the stat that people keep on harping on, and it has dropped a lot — but that household saving rate is a funny number.”For starters, household saving doesn’t include Canada Pension Plan contributions — “for most people, you figure that their CPP contributions are savings for retirement,” he said — which means federal efforts to enhance the pension plan won’t change that figure “one iota.”What’s more, Vettese said, the household saving rate deducts what retired Canadians might take out of their nest egg once it becomes a source of income.“So, with an aging population and more people drawing an income then used to be the case back in the 1990s, obviously it’s going to look like people are saving less.”Research compiled by actuary Malcolm Hamilton of the C.D. Howe Institute suggests that the rate of retirement saving for employed people has actually almost doubled in recent decades.Retirement savings plansHamilton’s data-crunching exercise — which sought to correct for household saving’s shortcomings — showed a surge between 1990 and 2012 in contributions to retirement savings plans, even as household saving dropped sharply. Over that 22-year period, contributions went from 7.7 per cent of earnings to 14.1 per cent.“Some of that is public pension saving plans, so employers and employees are both putting money in,” said Vettese. “But some of that is actually people putting money into their RRSPs. And you also have to figure that some of the money in TFSAs will be used for retirement.”The numbers released Wednesday show a clear preference among younger workers for tax-free savings accounts, which were introduced in 2009 by the former Conservative government.Of the 45 per cent of major income earners aged 15 to 24 who saved for retirement in 2015, 33.5 per cent opted for TFSAs, compared to 14.3 per cent who contributed to an RRSP. For 25 to 34 year olds, 42 per cent put money in a TFSA, versus 37.3 per cent for an RRSP.Perhaps not surprisingly, those aged 35 to 54 — a generation more familiar with the RRSP model than with tax-free savings accounts — showed a preference for the former, at more than 45 per cent. They were, however, better savers across the board, with nearly three-quarters of their ranks opting for at least one of the three savings tools.Where young and middle-aged would-be savers are concerned, a dramatic increase in housing prices relative to wage growth has been one the biggest challenges, said certified financial planner Jason Heath.The real estate factor“Double-digit real estate appreciation and one per cent wage growth don’t work long-run on a lot of levels,” said Heath, the managing director of Objective Financial Partners in Markham, about 30 kilometres north of Toronto.“This means that more cash flow is being allocated towards home down payments, and it’s taking longer to pay off mortgages. I’m seeing a lot of cases where people are going to have to rely on home equity as part of their retirement plan.”Like Vettese, Heath said he believes baby boomers are largely doing fine when it comes to financing their retirement years.“They bought homes and saved for retirement during a boom time,” he said. “It’s the latter half of the ‘Gen-X’ generation and millennials who are getting squeezed.”A bigger challenge for young and middle-aged Canadians, added Vettese, is the low interest rate environment and the impact that the aging population is having on the balance between savers and borrowers, despite efforts by government to stimulate the economy.“Interest rates are low now and they’re going to be staying low,” he said.“That’s going to be an issue for retirees, because obviously that means they’re not going to get as much of their income from investment returns in retirement as used to be the case.”— Follow @DaveHTO on Twitter
ITT Corp plans to separate the company’s businesses into three distinct, publicly traded companies. Under the plan, ITT would execute tax-free spinoffs to shareholders of its water-related businesses and its Defense & Information Solutions segment. Following completion of the transaction, ITT will continue to trade on the New York Stock Exchange as an industrial company that supplies highly engineered solutions. “For nearly a century, ITT has been known for transformative strategies that create value for customers and shareowners,” said Steve Loranger, chairman, president and chief executive officer of ITT. “In recent years, we have nurtured and grown our unique portfolio of businesses, which are now poised to emerge as three strong and focused standalone companies, with leading products and market positions, highly skilled employees and tremendous value-generating potential for shareowners. Each new company will be more nimble and able to build stronger, more intimate customer relationships to accelerate mutual success.“We believe each of these future companies will be strategically well positioned for growth, nicely capitalized, with global capabilities, outstanding operating track records and world-class leadership. In addition, we believe the transformation plan will provide more focused opportunities for our employees, who will be instrumental in the future success of all three companies.”Following completion of the spinoff, a standalone water technology corporation with a new corporate brand name will be formed through the combination of three of ITT’s current businesses: Residential & Commercial Water, Flow Control and Water & Wastewater (including biological, filtration and disinfection treatment and analytics). This company will be a global leader, with a very broad suite of innovative equipment, systems and applications.The company is expected to benefit from an already strong installed base, driving attractive aftermarket opportunities, as well as a diverse global footprint with approximately 55% of revenues coming from international markets and strong emerging market growth prospects. Pro forma 2011 revenue for the future water technology business is estimated at $3.6 billion.The water technology businesses will become a new company to be led by Gretchen McClain, currently President of ITT Fluid and Motion Control, who will serve as its future CEO. Its Executive Chairman of the board will be Steve Loranger, currently Chairman, President and CEO of ITT Corp.