As RRSP deadline passes, BMO study reveals women are 18% less confident than men in their retirement plans
As advisors and their clients hurtled towards today's RRSP deadline, a BMO study unveiled a worrying gender disparity when it comes to retirement planning and knowledge.
It found that women are 18% less confident than men in their retirement plans, and 18% less likely to know how much money they will need for retirement. The survey also found that 8% are less likely to know the RRSP contribution deadline and 12% less likely to know how much they can contribute to the account.
Fewer than half (41%) of women knew which investments can be held within an RRSP, while eye-catchingly, women were more likely than men not to be contributing to their RRSPs this year because of pandemic-related reasons (15% versus 9%).
Caroline Dabu, Head of Wealth Planning and Advisory Services, BMO Financial Group, believes that one of the biggest reasons behind these statistics is that women have less time to be on top of their finances, something that was a p[roblem even before the pandemic.
She said: “Pre-pandemic, 54% of caregivers were women, and they were more likely to be caring for parents and caring for children. That's only been exacerbated with a pandemic. In fact, since the pandemic started, mothers that are part of a dual career couple are twice as likely as fathers to spend more than five hours a day on household responsibilities.”
Dabu said the other piece of this gender cap is the impact of the pandemic on small businesses. Fifty per cent of businesses started today were founded by women, and more than 90% of these are micro businesses with less than 20 staff. It translates, therefore, that more women have been impacted by effect of lockdown and COVID-19 restrictions, so their focus tends not to be on longer-term savings, but on short- and medium-term cash flow.
Dabu added that women, however, are more active around financial management and have a greater propensity to consider a financial plan and an estate plan. They are open to advice but time remains a huge challenge. So, what can an advisor do to close the genfer gap exposed by the BMO survey.
Dabu said: “My advice to advisors would be to think of both the time challenges that women may face and to make things less complicated, give information in bite-sized pieces. The importance of having a financial plan is really important and women, studies have shown, are very open to taking a longer-term view and sitting down with a professional. Make sure you are proactive in developing content and make sure people feel comfortable.”
She added that advisors must also make an effort to engage all the family and be mindful of other people’s competing priorities.
The amount Canadians are holding in their RRSPs has increased but the study’s findings also indicated a steady decline across the board in knowledge of the benefits and features of the account.
The average amount held in RRSPs nationally is $112,295, a 3.3 per cent increase from 2019 ($111,929) and a 41 per cent increase from 2015 ($79,492). The overall amounts Canadians have contributed or plan to contribute has decreased by 15.5 per cent since 2019; however contribution amounts for this year are 15.8 per cent higher than the survey found in 2018. A total of 12 per cent of Canadians did not contribute this year due to the pandemic.
Other findings from the survey include:
- 71 per cent of Canadians know how to contribute to an RRSP, an eight per cent decrease from 2015
- 61 per cent of Canadians know the RRSP contribution limit, a 12 per cent decrease since 2015
- Only half (50 per cent) of Canadians are aware of what investments are eligible to be held in RRSPs, a 10 per cent decrease from 2015
- Fewer than half (44 per cent) of Canadians are aware that RRSPs can hold ETFs, while 79 per cent are aware that RRSPs can hold mutual funds