Drivers of Retirement Efficiency - NIA Partners with HOOPP and Common Wealth on New Report

December 17, 2018

The National Institute on Ageing (NIA) has partnered with the Healthcare of Ontario Pension Plan (HOOPP) and Common Wealth on a new report that shows the value of collective approaches to saving for retirement.

The Value of a Good Pension, supported by the work of NIA Director of Financial Security Research, Bonnie-Jeanne MacDonald, compares five types of retirement arrangements on a scale ranging from more individual to more collective approaches to saving for retirement.

‘Buying’ retirement security may be the most expensive purchase most people make, next to buying a home. The report shows a collective approach can reduce the amount that Canadians have to ‘spend’ in order to purchase a more secure retirement. As one progresses on the scale towards more collective arrangements, every dollar contributed to a Canada-model pension results in $5.32 in retirement income vs $1.70 using a typical individual approach. This means taking an individual approach would require approximately $890,000 more over a lifetime to generate the same level of retirement income as a worker in a Canada-model pension plan.

What drives this efficiency and creates value for money in pension arrangements?

Using evidence from academic and industry sources, the research determines that efficiency is created through five key value drivers; saving, fees and costs, investment discipline, fiduciary governance, and risk pooling.

The research shows, when saving in an individual arrangement, people save less and later than they would under a more collective plan with mandatory contributions or automatic enrolment. In addition, fees and costs tend to be significantly lower than the cost of retail investing and advice.

The research also shows that investment decisions made by professionals in collective arrangements tend to produce better results than decisions made my individuals. When considering fiduciary governance, the research shows investments managed on a not-for-profit basis by professionals with fiduciary responsibility tend to do better.

Finally, when looking at risk pooling, in individual arrangements, investors manage longevity and investment risk on their own which results in higher costs and greater risks, whereas more collective arrangements generate lower cost and efficiency created by pooling longevity and lowering investment risks.

Why is this important?

This report comes at a very important time when we are seeing a shift from collective to more individualized arrangements, with a growing decline in overall work place pension coverage for Canadians.

HOOPP contends that, “With stagnating incomes, rising costs for core areas of spending like housing and post-secondary education, lower expected returns from capital markets, rising household debt ratios, and a feeling among many that they are falling behind relative to previous generations, the issue of value for money in how we finance retirement has taken on new importance.”

Read the Full Report Here.

Read an Op-Ed about the HOOPP report, by Jim Keohane, Keith Ambachtsheer, and Alex Mazer.

The National Institute on Ageing (NIA) is a university-based think tank focused on leading cross-disciplinary research, thought leadership, innovative solutions, policies, and products on ageing. The NIA’s mission is to help governments, health care systems, pension plans, businesses, and Canadian families to best meet the challenges and opportunities posed to ageing Canadians and by an ageing demographic. Follow us on Twitter and sign up for our mailing list.

By Arianne Persaud, Manager of Advocacy, Government Relations and Stakeholders, National Institute on Ageing | Email:

Allan McKee