RRSP contributions to benefit from savings focus, CIBC says
The bank said disposable incomes rose 3.5% in the six months to September last year and that extra cash is going into savings. The savings rate rose during the recession by just under 5% to a nine-year high, CIBC said. That means Canadian households have more than $17 billion stored away compared with last year.
RRSP contributions had their biggest drop in six years last year, declining 2.2%, as global stock markets plunged in the wake of the financial crisis. The market rebound, with Canada’s benchmark index having its best year in three decades in 2009, is likely to tempt investors back into stocks, CIBC said.
"The impressive improvement in the stock market since March 2009 almost guarantees that the current RRSP season will fare better this time around, with more money likely to find its way into income and equity mutual funds," says Benjamin Tal, senior economist and author of CIBC's latest Consumer Watch report.
CIBC said it’s seeing renewed risk tolerance among Canadians. Chequing account balances have risen by almost 50% since the start of the recession as consumers kept their cash on hand, it said. Those levels are now beginning to decline again as confidence returns, it said.
"By far, the most popular destinations for this cash are bond and income funds, which have seen a cumulative increase of more than $12 billion since mid-2009," adds Tal.
"Dividend-based funds appear to be of particular interest, given their relative attractiveness in today's low interest rate environment. “
CIBC also said more women and younger investors are contributing to RRSPs, strengthening the RRSP market in the long term.
In terms of the mix between men and women, the share of female RRSP contributors surged in 2008, as women generally fared better economically during this past recession.
But despite this improvement, the RRSP participation rate among men is still higher than women, at 53% vs 47%.
| Tous droits réservés
