There is ongoing debate in Canada about optimal pension design. In the Economic Impact of British Columbia’s Public Sector Pension Plans, we compared the average B.C. retirement saver to a typical B.C. public sector pension plan retirement saver. The key difference between these two groups is that the B.C. public sector pension plan saver is covered by a comprehensive defined benefit plan, which effectively removes the discretionary aspect of retirement saving.
The study reveals that B.C.’s public sector pension plans result in higher contributions to retirement savings than RRSPs. If B.C. public sector plan members saved the same as typical RRSP savers in the province, they would accumulate about $2.2 billion less in savings every year. In terms of the overall economy the public sector plans lead to a larger savings pool for investment, which raises the capital stock in the economy.