The long-term effects of employer-sponsored pension plans on non-workplace returns on investments / by Derek Messacar and René Morissette.: CS11-0019/2019-1E-PDF ; CS11-0019/413E-PDF

"What is the effect of having an employer-sponsored pension plan (EPP) on financial performance in non-workplace investments? This paper offers new insight into this unresolved empirical issue, using administrative data on over 345,000 taxfilers from Canada. The paper makes two key contributions. First, an approach for inferring relative returns on investments is developed. The approach is based on a longitudinal analysis of saving flow-of-funds and wealth data related to the use of the tax-free savings account (TFSA). The analysis shows that asset balances are substantially heterogeneous across individuals with equivalent saving histories. Second, having an EPP is shown to raise the average return on investment in other tax-preferred saving plans, albeit by a very modest amount of approximately 0.50% to 1.25% over five years since the TFSA was introduced. This result is robust to augmenting the analysis to an instrumental variables approach that exploits variation in the availability of EPPs across cohorts by sex and industry of employment, which controls for the possibility that observed and unobserved differences between individuals with and without EPPs—such as the level of education or financial literacy—may confound the results"--Abstract, p. 5.

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