Pensions preferred over higher pay

Employers take note: Eighty per cent of Canadians say they would rather have a pension plan instead of a higher salary

Pensions preferred over higher pay
Credit: Stmool (shutterstock)

Eighty per cent of Canadians would rather have a better pension plan, or any pension plan, instead of a higher salary, according to a new survey.

“[This idea that] people would actually forego some salary increase to get a higher pension is something that I think surprises, just the level of commitment to that,” says Jim Keohane, president and CEO of the Healthcare of Ontario Pension Plan (HOOPP) in Toronto, which commissioned the survey. 

The 80 per cent is an interesting statistic, according to Susan Nickerson, a partner at law firm Torys pensions and employment practice and chair of the board for the Association of Canadian Pension Management (ACPM) in Toronto. 

“When you see that statistic for everyone who hasn’t had the privilege of having a pension in the workplace, they’re feeling exposed in terms of their retirement savings and say that they would be willing to give up future income in order to have that extra retirement security, so that was quite an interesting contrast,” she says.

Eighty per cent of the 2,500 respondents to the survey also said they would prefer if employers made direct contributions to a retirement plan instead of providing that money as salary. 

And a similar number would like to have a pension that pays out an amount based on what they earned while working, instead of one based on market performance or the financial success of the employer, found HOOPP.

Pension anxiety

The survey also found that pension plans are becoming scarce in Canadian workplaces: 44 per cent of workers have access to one and, for the 56 per cent who don’t, 49 per cent have saved nothing for their retirements. 

“There’s been a lot of pressure from shareholders for companies to get out of offering pension plans. In the past, pension was accounted for independently of their company, and it was just one line in their ledger, whereas now they have to put their entire pension plan on the balance sheet, which creates a lot of noise in the accounting statements. So, I think companies really are being pushed by the shareholders to actually get out of having defined pension plans,” says Keohane.

Canadian workers might also be suffering from a growing apprehension about their retirement incomes, suggests the survey: 75 per cent worry about saving enough for retirement, versus 55 per cent who reported being concerned about their personal debt. 

“About three-quarters of people have a lot of angst on pensions right now; [it] is maybe a bit higher than we would have expected,” says Keohane. 

Canadians are nearly as concerned about having enough money in retirement (75 per cent) as they are about their present-day cost of living (82 per cent) and more concerned than they are about their mental health (59 per cent), current personal debt (55 per cent) or government debt (64 per cent).

This trend is worrying for employers, says Nickerson.

“There’s a concern in the private sector among employers that their employees are not prepared, that their employees are worried about their financial wellness, whether it’s debt or they’re preparing for retirement. For employers, they want their employees to be financially well so that they are the most productive they can be while they’re working, and I think we know now that financial wellness plays into how productive a person is.”

For some workers, it can be tough to save for retirement without the forced savings offered through a pension plan.

“Unless people are in these compulsory plans, it’s very difficult to actually accumulate any savings,” says Keohane. “When you’re trying to do it on your own, it becomes a challenge for a lot of people to save because you’re 35 years old, it’s 30 years away, ‘I can deal with it later and right now I’ve got a lot of expenses to raising my kids, trying to pay for my house, trying to pay for my car’ and all these things.

“People left to their own devices in most cases have no pension savings; it becomes an afterthought,” he says. 

Joint effort

The survey also showed that Canadians feel governments have a role to play to address the issue: 83 per cent believe governments should modernize regulations to allow more innovative plans to be offered to Canadian workers.

There is an appetite to modernize the landscape, says Keohane. 

“My sense is that all three parties at both levels of government recognize this is a problem and they’re looking for ways [or] solutions to try and deal with it, but I think the solution comes in joint work that has to be done between labour, management, companies and government.”

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