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IFIC Stresses Importance of Fourth Pillar in Retirement Savings System Debate

May 3, 2010

TORONTO – The Investment Funds Institute of Canada (IFIC) today announced that it published its submission to the Department of Finance related to a request for comments on its consultation paper, Ensuring the Ongoing Strength of Canada’s Retirement Income System (the Federal Paper).

In its submission in respect of the Federal Paper, IFIC discusses the strengths of Canada’s retirement savings system and identifies a significant component of household financial assets that have been set aside by Canadians for a variety of savings purposes, including retirement income. This component, which IFIC calls the “fourth pillar”, includes assets contained within tax-free savings accounts and other non-registered investment and savings vehicles.

“The debate related to Canada’s retirement income system must include a discussion of all potential retirement assets,” said Joanne De Laurentiis, IFIC President & CEO. “This fourth pillar, with its significant asset base, can only serve to enhance the retirement income of Canadians.”

It is estimated that the assets contained within the fourth pillar equal $1.7 trillion, or roughly the same amount of assets in all of Pillar 3 which include all public and private employer sponsored defined benefit / defined contribution plans, and group and individual registered retirement savings plans (RRSPs).

IFIC recommends that the federal and provincial governments explore the full picture of retirement assets as they consider the sufficiency of the current retirement income system in Canada.

In its submission, IFIC notes that, according to data from the Organization for Economic Cooperation and Development (OECD), retired Canadians have an average income replacement rate of over 90 percent. This is significantly higher than the income replacement rates in the United Kingdom (72.9 percent), Australia (69.7 percent), and the United States (86.2 percent).

In addition, OECD data indicates that the elderly poverty rate in Canada is one of the lowest at six percent, well below the OECD average of 13 percent, and substantially below the rates in the United States (24 percent), and Australia (27 percent).

IFIC believes that the existence of all four pillars and the active work and assistance provided by advisors in Canada in the financial services industry is a major contributor to these outcomes. Research conducted by Ipsos Reid supports this view as 69 percent of investors who use an advisor have RRSPs, as opposed to 29 percent of non-advised investors.

Based on the strength of the current retirement system in Canada, IFIC recommends that everyone engaged in this debate consider the relevant research-based evidence in making their conclusions.

IFIC also recommends more targeted, cost-effective ways to remove complexity, uncertainty and regulatory costs and promote significantly increased retirement savings.

IFIC has been an active participant in the national debate on Canada’s retirement income system. It has made submissions to the Research Working Group on Retirement Income Adequacy that is chaired by Jack Mintz, and to the provincial consultations being conducted in Alberta, British Columbia, Manitoba and Nova Scotia.

The IFIC submission in respect of the Federal paper is available on the Policy section of the IFIC website at

IFIC is the national association of the investment funds industry. Membership consists of mutual fund companies, retail distributors and industry affiliates.

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For more information contact:
Laurie Gillett
Senior Manager, Communications
Phone: 416-309-2317

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The Investment Funds Institute of Canada (IFIC)


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