Employees with financial worries are likely to be distracted and less productive at work, making their financial stress their employer’s concern. But an employer’s workplace pension plan could reduce that stress, while also playing a part in attraction and retention.
Forty-seven per cent of Canadians report high stress about running out of money after retirement. And 51 per cent say retirement-planning stress has a medium to high impact on their work, according to a 2016 survey of more than 1,000 workers, commissioned by the Canadian Public Pension Leadership Council (CPPLC).
An American study published this summer echoes the CPPLC’s findings. It examined employer benefit costs over a 15-year period at 500 employers with at least 200 employees. It also analyzed employees’ concerns, expectations and desires for benefits. Workers are worried about their present and future finances, and about half often worry about their financial future, according to “Shifts in Benefit Allocations Among U.S. Employers: How Can Employers Better Deliver the Benefits Their Employees Want?” by Willis Towers Watson.
This stress affects workers in the present, as “employees bring their anxieties and distractions to work each day, where their worries impair performance, trigger lost days, raise stress levels and ultimately drag down productivity.”
While it is understandable to think older workers feel stressed about retirement, the research shows Canadians and Americans across generations are concerned about retirement planning.
There’s a surprising willingness among the majority of Canadians to contribute more of their annual income to receive features such as a lifetime retirement income, according to the CPPLC survey. Most surprising, younger Canadians are also very willing to contribute meaningfully to their retirement. Fifty-three per cent of those aged 18 to 24 said they would pay 10 per cent or more of their annual income to pension and retirement savings so they could retire and maintain the same standard of living, according to the CPPLC survey.
Their willingness to contribute to a predictable, secure lifetime pension makes sense in the context of addressing their concerns about their financial future. Millennials (aged 17 to 36) are the most worried about their financial future, with 55 per cent reporting they often worry about their future financial state, followed by 49 per cent of gen X (aged 37 to 52) and 43 per cent of baby boomers (aged 53 to 71).
Similar to the CPPLC study, the Willis Tower Watson survey found employees are willing to forego their income in exchange for more generous and guaranteed retirement benefits. This is the case across generations. Millennials (59 per cent) “are almost as willing to pay more out of their paycheck for a more secure retirement benefit as baby boomers (66 per cent) or gen-Xers (63 per cent).”
The CPPLC survey did not delve into the reasons for lower reported stress levels but plan design appears to be an important factor. Defined benefit (DB) plans provide a guaranteed lifetime pension calculated at retirement, so members know what their annual income will be and can plan their expenses accordingly. Both surveys show that employees highly value security and are willing to pay for it.
These insights into employees’ financial stress suggest employers may be able to harness their workplace pension as a productivity booster. The first step is to understand whether your workplace pension plan meets your employees’ needs.
In this process, you may learn that employees of all ages are willing to increase their own contributions in exchange for more secure features.
Employers without a workplace pension should consider whether offering a pension or retirement savings plan could increase their workplace productivity and improve attraction and retention. One option worth exploring is a modern multi-employer DB plan, such as the CAAT Plan. This will provide employees with a secure pension and employers with stable costs.
These plan designs can offer the best features of traditional DB and defined contribution (DC) plans, such as an adequate lifetime pension, while minimizing risks to employers and employees. The multi-employer plan model could also reduce stress for both members and employers — and that should reduce health benefit costs and boost employee engagement and productivity.
Providing a secure and meaningful pension is a great investment that will pay dividends for years to come.
Derek W. Dobson is CEO of the Colleges of Applied Arts and Technology (CAAT) Pension Plan in Toronto. For more information, visit www.caatpension.on.ca.
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