The title paraphrases a study from Stats Canada entitled, “Do Workplace Pensions Crowd Out Other Retirement Savings? Evidence from Canadian Tax Records”. This implies that forcing folks who don’t save for retirement to save for retirement by increasing their Retirement Pension Plan (RPP) contributions works quite well. A better question is, does forced savings work?
The study finds:
For workers who do not save much for retirement on their own, the $1.00 automatic increase in RPP contributions increased net savings by about $0.95. For workers who save regularly for retirement, the $1.00 automatic increase in RPP contributions was largely offset by a similar reduction in RRSP contributions. The study was designed in such a way that these results do not simply reflect program rules, such as contribution limits.
So if you take someone who doesn’t save much, save more, they keep more. If you make someone save more, who already saves, they will save less? Wow
Given this exciting perspective on Money and saving, where does the new Ontario Pension Fund fit in this equation? Food for thought? Forced Savings, an interesting idea.