OTTAWA, Ontario, Oct. 24, 2024 (GLOBE NEWSWIRE) — Retirees with defined benefit (DB) pensions are helping to stimulate business growth and job creation in their communities by injecting billions of dollars into the economy every year, a new study by The Conference Board of Canada (CBoC) has found.
“This research highlights the critical role of the defined benefit pension plans in supporting Ontarians, both in terms of retirement and broader economic growth,” said Alan Chaffe, Associate Director of Economic Research at The Conference Board of Canada. “The impacts discussed in the report are limited solely to the payouts made to pension beneficiaries. The final economic impact would be significantly greater if we were to consider the contributions made by pension plan investments – which also drive substantial economic growth, create jobs and generate tax revenues.”
DB pension plans supported more than one million beneficiaries in Ontario in 2023 and their pension benefits contributed $34.6 billion to Ontario’s gross domestic product – more than three per cent of the province’s total GDP, according to the CBoC report prepared on behalf of the Healthcare of Ontario Pension Plan (HOOPP), OPTrust and the University Pension Plan (UPP).
“It is also important to note that our analysis does not account for regional differences, where some areas may feel a much greater impact due to a higher proportion of retirees in their population,” continued Chaffe. “Regional impacts can be significant, particularly in communities where pension income represents a major source of economic activity.”
Ontario’s DB pension plans held more than $770 billion in assets in bonds, equities, infrastructure, real estate and other investments in Canada and internationally in 2023.
The CBoC report addresses an important, but often overlooked, economic impact of DB pension plans – the contribution retirees can make to their local economies by having access to predictable and stable benefits that last their entire lives.
The benefits paid out to retired DB pension plan members flow back into the Canadian economy, stimulating business growth and employment and generating revenue for all levels of government, the report said.
The report found DB pension plans supported over 1.23 million retirees and their families in Ontario, paying out $42.7 billion in benefits that account for 71 per cent of all retirement income from employer and personal pensions and savings plans (excluding public sources) in the province. The payout of DB benefits was roughly equivalent to the total wages paid in Ontario’s construction, accommodations and food services sectors combined.
The report highlighted some of the many ways DB pensions contribute to economic growth:
- DB pensions have a vital impact at the community level, supporting both retirees as well as local workers and businesses. Benefits paid to retirees in DB plans supported 251,900 full-time, full-year jobs in Ontario, generating $16.8 billion in labour income in 2023.
- On average, each dollar of DB pension payouts generated $1.43 in economic output for Ontario in 2023. The total economic output from DB pension payouts was more than $60 billion.
- On an annual basis, DB pension payouts generate over $17.4 billion in government revenue in Ontario, including $8.1 billion in federal taxes, $6.3 billion in provincial taxes and $3.0 billion in municipal taxes.
While the CBoC’s research shows the positive economic impact from DB pension payouts, the report also reveals the percentage of workers covered by DB pensions is much lower than it was two decades ago. In 2023, only 26 per cent of all employed workers in Ontario were members of a DB pension plan, down from 35 per cent in 2003.
For more information:
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The Conference Board of Canada
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About The Conference Board of Canada
The Conference Board of Canada is the country’s leading independent research organization. Since 1954, The Conference Board of Canada has been providing research that supports evidence-based decision-making to solve Canada’s toughest problems. Follow The Conference Board of Canada on X @ConfBoardofCda. For more information, please visit www.conferenceboard.ca.
About the Healthcare of Ontario Pension Plan
HOOPP serves Ontario’s hospital and community-based healthcare sector, with more than 670 participating employers. Its membership includes nurses, medical technicians, food services staff, housekeeping staff, and many others who provide valued healthcare services. In total, HOOPP has more than 460,000 active, deferred and retired members. For more information, please visit www.hoopp.com.
About OPTrust
With net assets of $25 billion, OPTrust invests and manages one of Canada’s largest pension funds and administers the OPSEU Pension Plan (including OPTrust Select), a defined benefit plan with over 111,000 members. OPTrust was established to give plan members and the Government of Ontario an equal voice in the administration of the Plan and the investment of its assets through joint trusteeship. OPTrust is governed by a 10-member Board of Trustees, five of whom are appointed by OPSEU and five by the Government of Ontario. For more information, please visit www.optrust.com.
About University Pension Plan Ontario (UPP)
University Pension Plan Ontario (UPP) is a jointly sponsored defined benefit pension for Ontario’s university sector. UPP manages CAD$11.7 billion in pension assets and proudly serves over 40,000 members across four universities and 14 sector organizations. UPP is growing a resilient fund to secure pension benefits for members today and for generations to come and is open to all organizations within Ontario’s university community. For more information, please visit myupp.ca.
