The paper by the C.D. Howe Institute says policy-makers often overlook improving Registered Retirement Savings Plans because, it is argued, not enough people actually make contributions.
But the think-tank points out that by taking into account those who only have private savings for retirement — as opposed to those who can rely on a workplace plan — then contribution rates are much higher.
The report says that RRSPs are "most beneficial" to those who make $50,000 or more and are not covered by a workplace plan.
Among this group, about half had made a contribution in 2013, contributing an average of 10 per cent of their earnings.
The institute argues that is not the case for low- to average-income workers, or those who make less than $25,000 a year or between $25,000 to $50,000 a year, who do not have a workplace pension. It says that is because they will receive enough from the Canada Pension Plan and other government programs to maintain their standard of living.
Using figures from Statistics Canada, the paper calculated that a low-income worker who earns $25,000 a year can expect to have disposable income of $22,070 less deductions while working. In retirement, the same worker can expect to receive $20,299 a year from a variety of sources, including the CPP benefits, the Old Age Security benefits and the Guaranteed Income Supplement.
Meanwhile, an average-income worker who earns $50,000 a year can expect to have disposable income of $38,520 less deductions while employed. In retirement, the same worker will receive an estimated $23,425 a year from government sources, making the need for supplementing that retirement income with private savings much greater.
Report author Alexandre Laurin argues that Ottawa should consider changing annual RRSP contribution limits to "lifetime contribution limits" to help benefit those who can ramp up savings later in life.
Laurin also said that low RRSP contribution rates, which have been used as a reason for the creation of provincial pension plans, like the upcoming Ontario Retirement Pension Plan, are not giving the whole picture on savings.
"RRSP utilization may still be lower than some would consider socially optimal, but not to the extent widely believed, and not to the point of establishing a strong case for a more public pension overhaul," said the report. "There are options available to encourage more private savings among those most in need of it."
Ontario is going ahead with its own forced pension plan, expected to roll out by 2017.
The plan, which will require contributions from both workers and employers. Ottawa does not support the plan and has turned down calls to enhance the Canada Pension Plan, which provides retirement benefits to contributing workers up to a maximum of about $12,500 annually. The average retiree only receives about $6,800 a year according to the Ontario government.
Ontario's plan will apply to workers who do not have comparable workplace pension plans, federally regulated employees and those with income below a yet-to-determined threshold. Counting those exempted, the plan will initially involve about three million Ontario workers.
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