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July 2001     Vol. 2, no. 7

Who contributes to RRSPs? A re-examination

Boris Palameta

Registered retirement savings plans (RRSPs) are one of the most important financial assets of Canadians note 1  (Statistics Canada, 2001a). Previous studies have established that RRSP participation rates are heavily influenced by income, but other potentially important factors—such as sex, age, and membership in an employer-sponsored pension plan—have not been investigated thoroughly. For example, although men on average participate at higher rates than women, they also typically have higher incomes. Hence, they may be more likely than women to contribute to an RRSP simply because they have a greater capacity to do so. Indeed, at equal income levels, women are more likely to contribute (Statistics Canada, 1999).

It is useful to distinguish between capacity to contribute and incentive to contribute—one does not necessarily imply the other. For instance, members of an employer-sponsored pension plan—identified by the presence of a pension adjustment (PA) on their tax forms—are about twice as likely as those with no pension coverage to contribute to an RRSP (Akyeampong, 1999; Statistics Canada, 1999). Although having an employer-sponsored pension plan is associated with high income, and therefore a high capacity to contribute, it is not clear that this would encourage RRSP contributions. In fact, having a PA may actually discourage contributions for two reasons: a pension guarantees retirement savings, even in the absence of an RRSP; and, a PA decreases the amount of tax-deductible income that can be used to purchase an RRSP (RRSP room). People with no pension coverage might in fact participate at higher rates than those with PAs, were their capacities to contribute the same.

RRSP participation rates also increase with age, up to age 54 (Akyeampong, 2000; Statistics Canada, 1999). However, income also increases with age. This begs the question: do older people participate at higher rates simply because they have a greater capacity to do so, or because they have a greater incentive?

This paper uses 1999 tax data (the most recent year that was available) to investigate the effects of sex, pension coverage and age on RRSP participation (see Data source and definitions). Comparisons between men and women, between those with and without PAs, and between different age groups are made at various income levels. The analysis is restricted to taxfilers aged 25 to 64 that had RRSP room in 1999. note 2  The amounts contributed are not examined.

Women participate at higher rates than men

In 1999, some 44.8% of men aged 25 to 64 with RRSP room made an RRSP normal contribution, compared with 37.6% of women. note 3 

However, men also had higher incomes—only 25.7% had annual incomes below $20,000, compared with 47.2% of women; 42.5% had annual incomes of $40,000 or more, compared with only 19.5% of women.

Men have a greater capacity to contribute than women do, but the playing field can be levelled by comparing men's and women's participation rates within the same income bracket. Women's participation rates were in fact higher in every income bracket (Chart A). And the pattern held when either age or PA status was factored in. note 4 

For all age groups, women's participation rates exceeded men's in every income bracket, except 55 to 64 year-olds with incomes of $80,000 or more.

Women with PAs participated at higher rates than men with PAs in every income bracket (Chart B). Women without PAs also participated at higher rates than men without PAs, except those with incomes of $80,000 or more.

Participation rates do not always increase with age

RRSP participation and income were both highest for people aged 45 to 54 (Table). Again, it is no surprise that the highest participation rate occurred at the age when people have the highest capacity to contribute.

When capacity to contribute was held constant by comparing age groups within the same income brackets, a somewhat different result emerged. Persons 45 to 54 had the highest participation rate at incomes less than $30,000. However, at incomes of $30,000 or more, 25 to 34 year-olds had the highest participation rate (Chart C).

A similar pattern emerged when age groups were split by sex or PA status. Men and women 25 to 34 participated at higher rates than their older counterparts in high income brackets.

Among people with PAs, the highest participation rate was found among 55 to 64 year-olds in low income brackets, and 25 to 34 year-olds in high income brackets. For those without PAs, 45 to 54 year-olds had the highest participation rate in low income brackets. In the two highest income brackets, 25 to 34 and 35 to 44 year-olds were virtually tied for highest participation rate.

Having a PA is associated with a higher participation rate only at low incomes

People with a PA had a higher RRSP participation rate than people without a PA—58.2% compared with 33.1%. However, the majority (57.3%) of people with a PA had annual incomes of $40,000 or more, while the majority (50.3%) of those with no PA had incomes less than $20,000.

If people with no PA had the same capacity to contribute as people with a PA, would their participation rates still be lower? In fact, people with PAs had higher participation rates only at incomes below $30,000—at higher incomes, those without PAs were the more likely contributors (Chart D). This result held for both men and women and for most age groups (Chart E). An exception occurred for those 55 to 64, where having a PA was associated with greater likelihood of contribution in all income brackets except the highest.


This paper shows that in order to more meaningfully assess how factors such as sex, age, and pension coverage influence RRSP participation rates, one must control for the effects of income. Overall, men participate at higher rates than women, older people participate at higher rates than young people, and people with PAs participate at higher rates than people without PAs. However, these results are largely attributable to income differences among the groups being compared. When comparisons were made at equal income levels, women, young people, and people without PAs had the higher participation rates in most cases. Further investigation is needed to shed light on exactly why these groups may have greater incentive to participate in RRSPs.


Data source and definitions

This analysis complements the findings released in Retirement Savings Through RPPs and RRSPs, 1999 (Statistics Canada, 2001b). The data originate from the PA/RRSP file, a longitudinal file on the retirement savings behaviour of each taxfiler since 1991. The analysis is limited to 1999 and uses a 2% sample of all taxfilers. Although some of the differences shown in this article are quite small, they are confirmed by the full file.

Income: total income as reported on line 150 of the T1 income tax form. It includes income from all sources, less losses from rental property and self-employment.

Earned income: the portion of total income that is used to determine RRSP room. It includes employment and self-employment income, business and rental income, and disability payments (less employment expenses such as union dues, and business and rental losses).

Pension adjustment (PA): For taxfilers whose employers provide a company pension plan, a PA is calculated according to a formula prescribed by the Canada Customs and Revenue Agency. The PA varies according to the amount contributed to the pension plan by the employer and the employee. The PA must be deducted from RRSP room. The PA deduction allows people without an employer-sponsored pension plan to make higher RRSP contributions than people with the same income whose employer provides a pension plan. For a small number of high-earning employees, the PA is high enough to wipe out their RRSP room entirely—these individuals are excluded from the study.

RRSP normal contribution: a contribution made within the limit set by the taxfiler's current RRSP room. In rare cases, such as some retiring allowance rollovers, taxfilers are permitted to make contributions that exceed their current RRSP room. Such contributions are excluded from this analysis.

RRSP participation rate: the percentage of taxfilers with RRSP room who make an RRSP normal contribution.

RRSP room: the maximum RRSP contribution that can be deducted from income (for income tax purposes). RRSP room increases with earned income. The maximum allowable annual new room is either a dollar amount or 18% of earned income, whichever is lower. In 1999, the dollar amount was $13,500. For those with an employer-sponsored pension plan, new room is reduced by the amount of the pension adjustment. Since 1991, any unused room can be carried over for use in subsequent years.


  1. RRSPs constitute 40% of total financial assets of Canadians, outstripping other savings instruments such as deposits in financial institutions, non-registered mutual funds, stocks, and bonds. The value of employer-sponsored pension plans was not included in the calculation of assets.
  2. People under 25 were excluded because many of them have not yet completed a transition into the labour force, while many people 65 and over have already retired.
  3. In some cases, these may be spousal RRSPs, where contributions are claimed as a deduction by one spouse but are credited to the other spouse's RRSP. The PA/RRSP file does not identify these situations.
  4. Comparisons that split men and women according to income, age, and PA status are not shown, because in many cases aggregates were too small to ensure accurate results. For example, among persons 55 to 64 in the 2% sample, only 86 women and 36 men had PAs and incomes less than $10,000.




 Table : RRSP participation rates, 1999


Boris Palameta is with the Labour and Household Surveys Analysis Division. He can be reached at (613) 951-2124 or

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