Matching contribution program helps with student loans, mortgages

RBC hopes employees will better prepare for retirement through shared responsibility
By Sarah Dobson
|Canadian HR Reporter|Last Updated: 11/28/2018
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RBC introduced a change to its savings program in July that involves employees’ student loans and mortgages. Robert Kneschke/Shutterstock

Getting employees excited about — or even mildly engaged in — retirement planning is no easy task. It’s often considered a far-off concern involving complicated formulas and predictions, accompanied by stress about personal finances.

To combat this challenge, RBC introduced a change to its savings program in July that involves employees’ student loans and mortgages.

The changes came about after RBC noticed younger employees were not putting as much towards the company’s defined contribution pension plan introduced in 2012, which also involves matching contributions from the bank, says Nadine Orr, vice-president of pension and benefits at RBC in Toronto.

“We thought we should really meet employees where they’re at,” she says.

“We wanted to create an experience... to put the employee at the centre, and if they’re paying down some of these student loans or mortgages early in their career, we wanted to reward that good financial behaviour.”

Just the mention of student loans and mortgages, rather than retirement, grabs people’s interest, says Orr.

“Because if you talk to a 20-year-old and say, ‘Our retirement plan’… they don’t even think about it. But if you say ‘student loan’ or ‘mortgage plan’, we’ve peaked their interest and that’s something they’re more interested in hearing about,” she says.

“It means something to them; they have a student loan — retirement is 40 years away: ‘Don’t talk to me about that.’”

Matching contributions

Through the program, workers with an RBC employee student loan can elect to receive a 50 per cent matching contribution from RBC to an employee savings plan — up to a maximum of six per cent of earnings, according to Orr.

So if an employee puts $200 towards her student loan, RBC will contribute $100 to go into a savings program. About 25 per cent of RBC’s new hires have $21,000 to $25,000 in student debt, she says.

“It’s up to the employee to select where that money goes into the savings plan, so it could be an RSP, it could be a TFSA or it could be a non-registered account. So it’s a fairly flexible savings vehicle.”

And if someone has a student loan somewhere else, RBC will honour the same rate if the employee switches to the RBC plan, though having people use RBC products is not really the impetus, she says.

“The employer match that we’re giving to that employee is going into long-term savings, so (it’s about) starting that savings behaviour earlier… to get you a better retirement.”

When it comes to the mortgage program, if an employee decides he wants to put his extra money into prepaying his mortgage, RBC will also give a 50 per cent match on that prepayment.

For the 60,000-employee financial institution, it was about bringing a differentiated program, says Orr.

“We’re being a lot more transparent when we’re communicating about the responsibility of employees, trying to educate them at the same time… trying to get them more engaged in their financial responsibilities. You go back 30, 40 years and the time of defined benefit pension plans, and the more paternalistic approach of ‘My employer will take care of me,’” she says.

“We still will, but with shared responsibility and education of our employees, knowing that they’re not going to stay with us for 30, 40 years that they used to, (it’s about) thinking differently about these programs and how we can help employees be successful.”

As for the cost, RBC budgeted for the program based on assumptions of how many people would be using this type of program, says Orr.

“There’s money set aside in the employment contract saying we’re going to offer employees this much retirement money. People are leaving the money on the table, so we’re trying to find a way for people to pick up that money,” she says.

“It’s trying to engage our employees in this relationship of financial wellness, but also having them take responsibility for their own financial well-being.”

“It’s getting them into the program, into that ‘I am saving, I want to save,’ and then they’ll start to see how those dollars are working. And then perhaps they start into the retirement plan much earlier than they would have before.’”

Gauging success

Thus far, in promoting the program that launched in July, there hasn’t been a huge communications splash, aside from emails and manager discussions, along with a presence on the company’s intranet and internal social media site, says Orr.

But once a year, RBC runs a financial wellness campaign as part of a global wellness program, and that’s coming up in January. The new savings program will be highlighted then.

As for gauging the success of such a program, it’s hard to get real metrics, she says.

“We get about 20,000 to 25,000 employees a year that are participating in financial wellness campaigns, and they get credit,” according to Orr.

“We have about 40 per cent participation for all our wellness campaigns — which is quite high — so we know that our employees are interested in wellness, specifically financial wellness.”

“It’s very hard to attract ROI in the wellness space and we have tried, and we have metrics, but it’s really the right thing to do for our employees,” she says.

“And we know that it’s important for them, so it is part of attracting and retaining new talent that is saying, more and more, that ‘Working for a company that cares about me is really important.’”

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