Plan members need info

HR and actuarial consulting firm Morneau Sobeco recently surveyed DC pension plan members about their knowledge of retirement concepts and asked them to rate their employers’ education and communication efforts.

The results showed plan members do not have a high level of investment knowledge — only about one-half said they know best how to invest their funds and just 45 per cent said they receive sufficient information to help them plan for retirement.

“Virtually every DC plan could do more to help its members better define their personal goals, and to devise an appropriate strategy to meet those goals,” write Peter Gorham and Fred Vettese in their report, What members want — Results of the 2000 DC Member Survey.

They also concluded that current educational materials assume greater familiarity with basic concepts than is the case, and plan sponsors appear to overestimate the basic investment knowledge of members, and those members who said they had limited investment knowledge also said they were unhappy with education efforts being made by employers.

The survey findings suggest members want clearer investment choices, though recent trends have been to offer more and more investment options, this has been driven by a vocal minority of plan members, write the authors. “We may be doing the majority a disservice.”

Respondents to the survey were asked the following six multiple-choice knowledge assessment questions. Just eight per cent answered five or more and less than half got three or more right.

•When investment rates rise, the value of a long-term bond fund does what? (32 per cent correctly said it falls.)

•A “money market” fund is a fund that invests in what? (44 per cent knew it was short-term securities.)

•A “real return” usually means the return on an investment after what? (19 per cent knew it is after inflation.)

•A “balanced fund” is what kind of fund? (72 per cent answered correctly that it is a fund holding both stocks and bonds.)

•To retire at age 60 with a monthly lifetime income of $1,000 (excluding government pension) I would need this much money. (20 per cent knew it was $140,000.)

•The average return on Canadian stocks over the past 20 years was what? (41 per cent said the average return was 10 to 19 per cent per year.)

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