Retirees with defined benefit pensions boost Ontario’s GDP and create jobs by injecting billions annually
A study from The Conference Board of Canada (CBoC) reveals that retirees with defined benefit (DB) pensions are significantly contributing to economic growth by injecting billions of dollars into their communities each year.
Prepared for the Healthcare of Ontario Pension Plan (HOOPP), OPTrust, and the University Pension Plan (UPP), the report shows the economic benefits of DB pensions on Ontario's economy.
The research found that DB pension plans supported more than one million beneficiaries in Ontario in 2023. These pension benefits contributed $34.6bn to Ontario's gross domestic product (GDP), representing over three percent of the province's total GDP.
The report highlights how DB pensions provide a stable income for retirees, which helps stimulate local economies and generate employment.
In 2023, Ontario’s DB pension plans held over $770bn in assets, invested in a range of areas including bonds, equities, infrastructure, and real estate, both in Canada and internationally.
According to the CBoC report, the economic impact of these DB pensions extends beyond just the investments, as the benefits paid out to retirees flow back into the economy, boosting business growth and creating jobs.
“This research highlights the critical role of the defined benefit pension plans in supporting Ontarians, both in terms of retirement and broader economic growth,” stated Alan Chaffe, associate director of Economic Research at The Conference Board of Canada.
DB pension plans paid $42.7bn in benefits in 2023, which supported over 1.23 million retirees and their families in Ontario. These benefits accounted for 71 percent of all retirement income from employer and personal pensions and savings plans in the province, excluding public sources.
The total DB payouts were comparable to the combined wages in Ontario's construction, accommodations, and food services sectors.
The report details the ways DB pensions support economic growth. Pension benefits supported 251,000 full-time jobs in Ontario, generating $16.8bn in labour income.
On average, each dollar paid out in DB pension benefits generated $1.43 in economic output, resulting in a total output exceeding $60bn in 2023.
Additionally, these benefits generated over $17.4bn in government revenue across federal, provincial, and municipal levels.
Chaffe also emphasized the importance of recognizing regional impacts, explaining that “some areas may feel a much greater impact due to a higher proportion of retirees in their population. Regional impacts can be significant, particularly in communities where pension income represents a major source of economic activity.”
While the CBoC report highlights the positive economic impact of DB pension payouts, it also sheds light on a concerning trend.
In 2023, only 26 percent of employed workers in Ontario were members of a DB pension plan, a significant decline from 35 percent in 2003.
