May 2000 Fraser Forum: May Questions and Answers and May Graph
Q: How many people contribute to RRSPs? How has this changed over time?
A: In 1982, 2.1 million people (14 percent of tax filers) sheltered income in RRSPs. The number and proportion of contributors has been growing steadily ever since. As of 1997, the proportion of tax filers taking advantage of this tax break had more than doubled to 30 percent, and the number of Canadians who made an RRSP contribution had almost tripled to 6.1 million (see table 1).
| Year | Contributers (millions) | Proportion of tax filers (percent) |
|---|---|---|
| 1982 | 2.1 | 14.0 |
| 1984 | 2.6 | 17.0 |
| 1986 | 3.2 | 19.0 |
| 1988 | 3.8 | 22.0 |
| 1990 | 4.1 | 22.0 |
| 1992 | 4.8 | 25.0 |
| 1994 | 5.4 | 27.0 |
| 1995 | 5.7 | 28.0 |
| 1996 | 6.0 | 28.8 |
| 1997 | 6.1 | 29.8 |
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Sources: Revenue Canada, Taxation Statistics, various years; Revenue Canada, Tax Statistics on Individuals, various years; calculations by the author. |
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Q: Who uses the RRSP tax deduction?
A: Table 2 shows RRSP participation by income group. One-third of all contributors earned less than $30,000. Eighty percent of all contributors earned less than $60,000. Over one third of the people in the $20,000 through $30,000 income group claimed an RRSP deduction from their income tax in 1997; participation jumps to just below half for the $30,000 through $40,000 group. Forty-four percent of the total dollar value of RRSP contributions came from those with incomes under $50,000.
| Income group | Proportion of tax filers who made RRSP contributions (percent) | Distribution of contributors (percent) | Value of contributions (thousands of dollars) | Average contribution (dollars) | Average contribution as a percent of median income |
|---|---|---|---|---|---|
| Loss and Nil | 0.5 | 0.1 | 6,984 | 2,079 | n/a |
| $1-$10,000 | 3.9 | 3.1 | 202,503 | 1,087 | 21.7 |
| $10,000-$20,000 | 14.6 | 12.1 | 1,290,995 | 1,748 | 11.7 |
| $20,000-$30,000 | 34.1 | 18.1 | 2,640,578 | 2,390 | 9.6 |
| $30,000-$40,000 | 49.7 | 19.9 | 3,902,971 | 3,215 | 9.2 |
| $40,000-$50,000 | 59.5 | 15.5 | 3,905,152 | 4,136 | 9.2 |
| $50,000-$60,000 | 66.1 | 11.4 | 3,437,060 | 4,958 | 9.0 |
| $60,000-$70,000 | 71.6 | 7.3 | 2,706,881 | 6,083 | 9.4 |
| $70,000-$80,000 | 75.7 | 4.1 | 1,979,528 | 7,877 | 10.5 |
| $80,000-$90,000 | 77.3 | 2.4 | 1,414,476 | 9,533 | 11.2 |
| $90,000-$100,000 | 77.2 | 1.5 | 1,029,757 | 11,275 | 11.9 |
| $100,000-$150,000 | 73.9 | 2.7 | 2,422,530 | 14,656 | 11.7 |
| $150,000-$250,000 | 71.7 | 1.2 | 1,282,624 | 17,730 | 8.9 |
| $250,000 and over | 71.8 | 0.7 | 911,292 | 20,534 | 8.2 |
| Total | 29.8 | n/a | 27,133,331 | 4,446 | n/a |
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Sources: Revenue Canada, Tax Statistics on Individuals, 1997 Tax Year, (Interim Statistics - Universe Data), 1999; calculations by the author. |
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Q: How do RRSP contributions vary with age?
A: In 1997, the proportion of tax filers who made RRSP contributions varied between 3.4 percent for those under 20 years of age, and 43.2 percent, for those aged 50 through 59. Table 3 shows the proportion of each age group that made RRSP contributions in 1997 and 1982. This month's graph shows this breakdown for 1997, 1990, 1985, and 1982. Every age group under 60 through 64 reflects the sharp increase in overall RRSP participation. The proportion of Canadians in the 20- through-29 age group who claimed an RRSP deduction more than quadrupled from 6 percent to 25.1 percent between 1982 and 1997.
| Age group | Proportion of tax filers who contribute to RRSPs (percent) | Distribution of RRSP contributions (percent) | Distribution of RRSP contributors (percent) | |||
|---|---|---|---|---|---|---|
| 1982 | 1997 | 1982 | 1997 | 1982 | 1997 | |
| <20 | 1.0 | 3.4 | 0 | 0 | 0 | 0 |
| 20-29 | 6.0 | 25.1 | 9 | 8 | 12 | 15 |
| 30-39 | 14.0 | 38.1 | 21 | 25 | 25 | 28 |
| 40-49 | 21.0 | 42.7 | 22 | 30 | 23 | 29 |
| 50-59 | 27.0 | 43.2 | 27 | 26 | 26 | 20 |
| 60-64 | 27.0 | 28.3 | 12 | 7 | 10 | 5 |
| 65+ | 6.0 | 4.6 | 8 | 4 | 4 | 3 |
| Total | 14.0 | 29.8 | n/a | n/a | n/a | n/a |
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Sources: Revenue Canada, Taxation Statistics, 1984 Edition, 1984; Revenue Canada, Tax Statistics on Individuals, 1997 Tax Year, (Interim Statistics—Universe Data), 1999; calculations by the author. |
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