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Many Canadians don’t know pension contribution limits: survey

Fewer than one in 10 Canadians say they were knowledgeable about the investment choices they should consider to maximize their retirement savings.

Birgit Reitz-Hofmann/iStock

More than half of Canadians who have workplace retirement plans are unaware of how much money they can contribute to it, according to a BlackRock retirement survey released Tuesday.

BlackRock's Global Investor Pulse Survey – which interviewed 2,000 Canadians – revealed that more than 40 per cent of Canadians say that saving for retirement is a top priority for them, but many of them have low levels of awareness on how to reach their retirement goals.

Forty-three per cent of those surveyed have some kind of workplace retirement plan, such as a defined benefit pension, a defined contribution pension or a group Registered Retirement Savings Plan. But shockingly, 52 per cent of those Canadians with workplace plans do not know what the maximum contribution to their workplace retirement plan is, with just one-third usually contributing the maximum amount.

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"While it's understandable that not everyone can or will contribute the maximum to their workplace retirement plan, everyone should know what their options are," says Karrie Van Belle, managing director at BlackRock Canada. "At the end of the day, we all have an active role – and responsibility – in ensuring we're meeting our retirement goals, and it all starts with awareness."

Fewer than one in 10 Canadians say they were knowledgeable about the investment choices they should consider to maximize their retirement savings, with only 36 per cent claiming some level of knowledge.

"There's an underlying knowledge deficit about retirement planning and financial goals, but taking a few simple steps – like taking stock of your options and starting to decide what's right for you – can make a huge difference," says Ms. Van Belle.

The high cost of living is viewed as the dominant threat to Canadians' future financial well-being, with 67 per cent of Canadians placing it as the No. 1 risk to their future. But confidence has also been eroded by anxieties about the economy, health care costs and inflation.

The survey – which was conducted prior to the federal election – also indicates concerns around changes in government pensions and taxes, two things on Liberal prime-minister-designate Justin Trudeau's agenda for change.

As well, the Liberals have proposed to roll back the Tax Free Savings Account contribution limit to $5,500 from $10,000, and that could impact retirement plans for many Canadians as 42 per cent of those surveyed reported having a TFSA, many of whom say they plan to use the account for retirement savings.

"Canadians should certainly be looking at the TFSA as a form of retirement savings especially for those where the RRSP may not make sense economically – such as someone in a lower income tax bracket," says Jamie Golombek, managing director of tax and estate planning with CIBC Wealth Advisory Services.

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"At the same time, the TFSA provides the additional flexibility for those who have short-term goals in that they are able to withdraw funds at any time – without tax – and still be able to recontribute the following calendar year."

Despite Canadians having a high priority for retirement savings, one problem that continues to plague investors is the amount of savings sitting in cash or cash holdings.

According to the survey results, two-thirds of Canadians believe they have the right asset allocation mix to reach their retirement needs when, in fact, cash levels are far too high with 60 per cent of Canadians' savings and investments currently held in cash or cash holdings including cash deposits and savings accounts, guaranteed investment certificates and money markets.

"With interest rates sitting at historic lows, their money is not working hard enough for them," says BlackRock in the survey report. "This proportion is double what Canadians believe they should have but this hasn't motivated them to change."

In addition to the 60 per cent held in cash, Canadian investors also hold 19 per cent in equities, 7 per cent in bonds, 4 per cent in property, 3 per cent in alternatives and 7 per cent listed as "other."

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