By: Healthcare of Ontario Pension Plan (HOOPP)
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, according to a new study by The Conference Board of Canada (CBoC).
The study, commissioned by HOOPP, OPTrust and the University Pension Plan (UPP), shows that in 2023, over 1.2 million Ontarians were supported by DB pension benefits. That year, over $42 billion in retirement income was paid to DB pensioners with approximately 20 per cent, or $8 billion, from employee and employer contributions, while up to 80 per cent, or $34 billion, came from investment returns.
“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 CBoC.
“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."
Community impact and job creation
DB pensions, like HOOPP, provide retirees with a secure and predictable monthly income for life. This financial certainty enables them to spend confidently and plan for their future comfortably, driving consumer spending and supporting local businesses, like stores and restaurants.
In fact, the spending of DB pension payouts supported over 250,000 full-time, full-year jobs – roughly the equivalent to the population of Windsor – generating over $16 billion in labour income and benefits and contributing more than $34 billion, or more than 3 per cent, to the province's GDP last year.
On average, each dollar of DB pension payouts generated $1.43 in economic output for the province, contributing more than $60 billion in total economic output. Additionally, DB pension payouts generated substantial government revenue within Ontario, amounting to over $17 billion annually, including more than $8 billion in federal taxes, $6 billion in provincial taxes, and $3 billion in municipal taxes.
The analysis also found that:
71% of retirement income in Ontario is from DB pension plans.*
98% of the DB pension payments spent by beneficiaries are spent within Canada.
90% of active DB pension plan members in the province are enrolled in Ontario-registered plans.
“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," said Chaffe. “Regional impacts can be significant, particularly in communities where pension income represents a major source of economic activity."
Future outlook
DB pension plans, like HOOPP, provide members with a financially secure future in retirement, making them a highly valuable benefit that helps employers attract and retain top talent. Despite this and the positive economic impacts, the percentage of Ontario workers covered by DB pension plans has decreased over the past two decades. In 2023, only 26 per cent of employed workers in Ontario were members of a DB pension plan, down from 35 per cent in 2003. As the workforce continues to evolve, addressing the challenges facing DB pension plans is essential. Ensuring the sustainability and accessibility of these plans is critical for future generations of retirees.
HOOPP remains committed to advocating for a more secure retirement for all Canadians and exploring how pensions impact members, their communities and the economy.
For more information on the economic impact of DB pension plans, we encourage you to access the full report.
*from employer and personal pensions and savings plans (excluding public sources).