Pensions still popular with workers: Poll

But administrative burden, expanded CPP challenge employers
By Sarah Dobson
|Canadian HR Reporter|Last Updated: 05/08/2018
Muskoka Chairs
Membership in registered pension plans has gone up overall, according to Statistics Canada, but that involves gains in the public sector and declines in the private sector. Credit: Lightspring / Shutterstock

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While they have faced considerable instability of late, pension benefits are still a major factor for many employees when deciding whether to accept a job.

Nearly four in five (78 per cent) of workers and retirees with pension plans said the availability of pension benefits is a critical factor in deciding whether or not to accept a job, found a survey of 2,750 people in the United States and Canada.

Not surprisingly, pensions are also important when it comes to retaining employees, as nearly three-quarters (73 per cent) of respondents said they stayed with an employer due to pension benefits.

Even the younger set find these benefits appealing, with 82 per cent of those ages 20 to 37 (millennials) and 81 per cent of those ages 38 to 52 (generation X) citing the benefits as a critical factor in accepting a job, compared to 74 per cent of baby boomers (ages 53 to 71), found the survey by management consulting firm Accenture.

People are starting to better understand how important their retirement is — and how ill-prepared they are, said Owen Davies, lead for the global pension practice at Accenture in Sacramento, Calif.

“I also think the younger generations… their view of their careers is very portable, they’re not going to sign on to a place out of college and work there and retire, so they need to make sure they’re squeezing everything they can out of each employment opportunity when it comes to their retirement,” he said.

“They have high expectations for the post-working phase of their life to do stuff, and when you ask them about it directly, it forces them to think about it and answer it correctly. So, I don’t think it’s a casual ‘Yeah, that’s important to me.’”

Studies have shown a fairly large percentage of employees are stressed about their financial situation, and worried about not having enough money to retire, said Todd Saulnier, vice-chair of the national policy committee at the Association of Canadian Pension Management (ACPM) in Halifax.

And employers recognize the importance of offering some kind of retirement savings plan, he said.

“They do feel it is a need, probably because their competitors are offering programs,” he said. “It may not necessarily be a registered pension plan with a provincial authority, but it might be some savings vehicle.”

There are more administrative and regulatory requirements in a pension plan, so some employers may prefer the group RSP/DPSP (deferred profit sharing plan) approach, said Saulnier.

“In some sense, it might even support employees better because the locking-in rules with some pension legislation are a little restrictive.”

One the one hand, there’s an increasing shortage of labour, according to Dan Kelly, president and CEO of the Canadian Federation of Independent Business (CFIB) in Toronto.

“Employers do recognize that to attract and retain talent, they’re going to have to be more creative.”

But implementing a pension is probably one of the last steps an employer would take in that mix, he said.

“It could be employee health and dental (benefits) before that, it could be additional vacation or some flexibility for work-life balance — there’s a lot of steps an employer would try before going down the road of a pension.”

It’s a challenge for many small to mid-size employers to play in that realm as there are not a lot of products designed for them, and the price and administrative burden associated with pensions can be quite cumbersome, said Kelly.

“The fact is that pensions, company pension plans, are becoming a thing of the past, other than in government circles,” he said.

“Governments basically are one of the only employers that believes it can afford to offer pension plans, certainly defined benefit plans, and I don’t think there’s been… any increase or anything moving away from the trend of employers dropping pension plans, year after year, as they become riskier and more unaffordable.”

Membership in registered pension plans (RPPs) in Canada totalled 6,262,000 in 2015, up 4,900 members compared to 2014, according to the latest numbers from Statistics Canada.

Membership in public sector pension plans increased by 16,500 to 3,229,000, while the number of members in private sector plans fell by 11,600 to 3,032,000.

The government has said the expanded Canada Pension Plan (CPP) will help smaller firms compete with larger counterparts because there won’t be as big a gap when it comes to pension benefits, said Kelly.

“If anything, employers will be struggling with the weight of the increased CPP plan, and if they can afford anything beyond that, they would likely do that through a matched RSP or perhaps a PRPP (pooled registered pension plan), or maybe a DC (defined contribution) plan.”

With the expanded CPP, it’s possible some Canadians might start to say, “‘Oh well, I guess the government’s got me, I don’t need to start saving on my own or through my employer,’” he said.

But there is still a role for employer-sponsored pensions or other savings vehicles with the enhanced CPP, said Saulnier.

“It might change the amount they feel they need to contribute. Certainly, we have seen employers who have a program already questioning whether they should adjust their support to the program, whether it’s a pension plan or DC plan. If it was already fairly rich, should they consider scaling back a little bit their support given the increase in CPP? And I think that’s a reasonable response.”

Guidance wanted

Either way, when it comes to retirement, current and retired employees want more help with retirement planning (82 per cent of all respondents) and retirement coaching (84 per cent), found the survey by Accenture.

Half (49 per cent) of the employees said their employer offers retirement education or coaching, while one-third (32 per cent) said their employer does not, with the remainder (about 20 per cent) uncertain.

But, overall, most current and retired workers — 77 per cent — said they wanted more knowledge and understanding of their retirement options.

More than half (54 per cent) said they would like to attend a webinar for retirement education, while 50 per cent are interested in using a mobile app and 46 per cent would like to use a digital retirement coach.

There’s a hunger out there for coaching and mentoring, said Davies.

“A lot of these pension entities have a relationship with somebody from hire to retire to expire, and that’s an 80-plus-year relationship. And it’s (about having) the interactions over that long-term to help nudge somebody to really impact that retirement trajectory. The mobile platform is the best way to engage those members because they’re on that platform now doing everything else in their lives… and their retirement is really absent from that space.”

Whether it should all come from the employer, that’s open for debate, he said.

“I do think these retirement entities should do more coaching or mentoring because they all have great education programs and great content, and some of them have been in existence for 50, 60 years so they have a lot of data to mine, to show results and how actions can influence those things.”

There’s definitely an interest from employees looking for assistance when it comes to financial wellness, said Saulnier.

“A lot of employees feel that their employer should have a way for them to get financial advice without necessarily going to a bank or doing it on their own… they actually trust their employer more than they trust the bank or insurance company when it comes to providing access to financial advice.”

It’s always surprising to hear many employees don’t participate in matching programs, said Kelly.

“It always seems nuts because they are leaving perhaps matched contributions on the table, so free money… but we have to remember there are a lot of employees living pretty closely to the line, so finding some additional dollars to save for their retirement is pretty tough.”

There is an absolute need for greater education of employees as to what to do with their money, to the extent they have choices in terms of investment vehicles, and how to make that happen, he said.

“I can certainly see employers doing that.”

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